Photo credit: Gabby Jones/Bloomberg

Crypto trading platform Robinhood paid a settlement of $3.9 million to the California Department of Justice for failing to allow customers to withdraw their crypto from their accounts from 2018 to 2022.

According to California Attorney General Rob Bonta, the settlement made with the California Department of Justice resolves the investigation of Robinhood violating the California Commodities Law.  

The announcement made on Sept. 4 claimed that the investigation began when consumers complained about “questionable behavior in the cryptocurrency industry. ”

California’s Justice Department found that Robinhood sold commodities contracts that violated the CCL and allowed investors to buy crypto “without actually delivering these assets to customers.” 

The Attorney General also claimed that customers could not withdraw their cryptocurrency and “were forced to sell it back to Robinhood to exit the platform.”

Setting Robinhood as an example, Attorney General Bonta warned:

“Whether you're a brick-and-mortar store or a cryptocurrency company, you must adhere to California's consumer and investor protection laws. I am dedicated to using all the tools available to my office to protect California consumers in the face of advancing technology in the marketplace.”

Robinhood was also under scrutiny from California’s Justice Department for misleading customers through false advertisements. The crypto trading platform claimed that it would connect to multiple trading venues, which was not always true, says Attorney General Bonta.

Although Robinhood claimed that it held all the customers’ funds within the platform, the investigation revealed there were instances where the crypto trading platform arranged other “trading venues” to hold the customer’s crypto assets.

Complementing the $3.9 million penalty, California’s Justice Department — under the settlement agreement — ordered Robinhood to allow customers to withdraw their crypto assets. 

As per the settlement agreement, Robinhood has been ordered to “ensure that its written representations to customers about its trading and order handling practices materially comport with such practices, including the routing of orders to trading venues, and cryptocurrency purchase and sale prices.”

These measures are part of a broader effort to protect California investors. Reflecting this commitment, Attorney General Bonta stated, 'I am dedicated to using all the tools available to my office to protect California consumers in the face of advancing technology in the marketplace.