Robinhood to pay $30M to settle US regulator probes
Source: Coin Tegraph
Online trading platform Robinhood has agreed to pay $29.75 million to settle several probes from the Financial Industry Regulatory Authority (FINRA) related to the company’s supervision and compliance practices.
The settlement figure consisted of a $26 million civil fine and $3.75 million restitution to customers, FINRA said on March 7. Robinhood failed to “respond to red flags of potential misconduct,” FINRA said, leading to Anti-Money Laundering and supervisory and disclosure violations.
FINRA found that Robinhood Financial failed to reasonably supervise its clearing system despite there being noticeable processing delays due to increased demand between March 2020 and January 2021, which coincides with when Robinhood restricted trading in so-called meme stocks such as GameStop (GME) and AMC Entertainment Holdings (AMC).
FINRA said Robinhood Financial and Robinhood Securities also failed to detect, investigate or report manipulative trades, suspicious money movements and instances where customer accounts were taken over by third-party hackers.
Robinhood Financial was also found to have opened “thousands of accounts” when it had not reasonably verified the customer’s identity, FINRA said.
As such, Robinhood failed to establish and implement reasonable Anti-Money Laundering programs, the financial regulator added.
Robinhood also failed to “reasonably supervise and retain” social media communications by promoting posts from paid social media influencers, FINRA added.
“Some of these communications included statements that were promissory or not fair and balanced, and thus misleading to investors.”
Also Read : Want to save big? Discover how to layer credit card offers, coupons, and rewards for maximum benefits | Mint
The $3.75 million in restitution resulted from Robinhood Financial providing customers inaccurate or incomplete disclosures through “collaring” market orders by converting them to limit orders.
Both Robinhood Financial and Robinhood Securities consented to the entry of FINRA’s findings without admitting or denying the charges.
Related: DeFi’s Missing Link: Fixed Income (feat. Treehouse)
It comes just two months after two Robinhood entities reached a $45 million settlement with the US securities regulator on Jan. 13 after an investigation accused the company of violating more than 10 securities law provisions.
Robinhood Financial and Robinhood Securities “admitted to certain findings” in that investigation, which accused them of failing to maintain and preserve electronic communications from customers between 2020 and 2021, among other things.
Meanwhile, Robinhood reported a company-record $916 million net income and over $1 billion in revenue in the fourth quarter of 2024.
Crypto revenue accounted for $358 million of Robinhood’s $672 million transaction-based revenues — a 200% year-on-year increase — while crypto trading volumes rose 450% year-on-year to $71 billion.
Magazine: Meet lawyer Max Burwick — ‘The ambulance chaser of crypto’
