Robinhood Markets Receives SEC Notice for Alleged Securities Violations at Crypto Unit
Robinhood Markets Inc. is currently under the regulatory microscope, having received a notice from the Securities and Exchange Commission (SEC) concerning alleged securities violations within its cryptocurrency division. In a detailed regulatory filing, Robinhood revealed the receipt of investigative subpoenas from the SEC, pinpointing areas of concern such as cryptocurrency listings, the custody of digital assets, and the operations of its platform.
The company has stated that Robinhood Crypto has been cooperative with the ongoing investigation. The scrutiny intensified last week when the crypto division was issued a Wells notice by SEC staff. This notice serves as a formal indication that a preliminary decision has been made to potentially pursue enforcement actions against Robinhood Crypto for these alleged violations.
According to the filing, the SEC’s potential enforcement could take the form of a civil injunctive action, a public administrative proceeding, or a cease-and-desist proceeding. The range of penalties and remedies under consideration includes injunctions, cease-and-desist orders, disgorgement along with pre-judgment interest, civil money penalties, and possible censure or revocation of licenses and restrictions on future activities.
In response to the SEC’s actions, Dan Gallagher, the Chief Legal, Compliance, and Corporate Affairs Officer at Robinhood Markets, expressed disappointment, particularly given the company’s proactive efforts to seek regulatory clarity. “After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business,” stated Gallagher. He staunchly believes that the cryptocurrencies listed on Robinhood’s platform do not qualify as securities and anticipates that any action against Robinhood Crypto would lack substantiation on both factual and legal grounds.
Robinhood has highlighted its cautious approach to cryptocurrency listings, opting not to include certain tokens and refraining from offering products such as lending and staking. These are services the SEC has previously identified as securities in actions against other platforms. The company has also sought to register a special purpose broker-dealer with the agency, further showcasing its dedication to compliance.
Despite these regulatory challenges, Robinhood assures its customers that their accounts and the services provided will remain unaffected. The company is also preparing to unveil its quarterly results soon, indicating that it will be business as usual despite the ongoing investigation.
