The California Department of Justice said it has slapped Robinhood with a $3.9 million penalty after finding that the crypto and stock trading platform did not allow customers access to the cryptocurrency in their wallets, misled customers about the best crypto trade rates, and was not transparent about who held their assets.
The settlement marks the first public enforcement action by the state DOJ against a crypto company.
"Our investigation and settlement with Robinhood should send a strong message: Whether you're a brick-and-mortar store or a cryptocurrency company, you must adhere to California's consumer and investor protection laws," Attorney General Rob Bonta said in a statement accompanying the late Wednesday announcement.
Under the settlement, Menlo Park, California-based Robinhood did not admit or deny the allegations.
Bonta's office, which began investigating Robinhood in 2021, said that from 2018 to 2022 customers holding crypto in their accounts were not able to transfer those assets to their own wallets and had to sell the currency to get off the platform.
In addition, Robinhood's pledge that it would connect to multiple trading venues to ensure customers buying or selling crypto obtained the best price was not always true, the DOJ said.
The company also failed to keep customers' assets secure and did not tell them that at times it arranged for other crypto exchanges to hold customer assets for extended periods, investigators found.
