Robinhood’s crypto trading venture comes under legal scanner: details

Robinhood, the US-based crypto trading service has found itself in legal trouble in the US. Earlier this week, the US Securities and Exchange Commission (SEC) issued a “Wells Notice” against Robinhood. With this, Robinhood joined the list of several other crypto firms that had to face the SEC and explain the ins and outs of their business operations. US authorities want to ensure that their citizens dealing with digital assets are protected against the financial risks these assets pose.

In the US, the Wells Notice suggests that authorities such as the SEC plan to take legal action against the entity to which it was issued, which in this case is Robinhood. The notice indicates that, following an investigation, the SEC has acquired reason to believe that Robinhood has violated US securities laws.

“On May 4, 2024, Robinhood crypto (RHC) received a ‘Wells notice’ stating that SEC staff had notified RHC that it had made a ‘preliminary decision’ to recommend that the SEC pursue enforcement action against RHC. alleging violations of the Securities Exchange Act of 1934, as amended,” said the official document outlining the development.

At the moment, details about the proceedings in the case are awaited.

“A potential claim may include a civil action for an injunction, a public administrative proceeding, and/or a cease and desist proceeding and may seek remedies that include an injunction, cease and desist order, injunctive relief, prejudgment interest, civil monetary penalties and reprimands, forfeitures and restrictions on activities,” the document noted.

Many have criticized the SEC for probing the crypto sector by filing court battles against them one after another.

The SEC has previously launched extensive investigations into crypto behemoths such as Binance and Coinbase, citing legal issues surrounding their respective business operations.

Meanwhile, Robinhood expects a significant jump in its earnings and growth rate. In February, the company it is reported revealed that revenue collected from its crypto trading business increased 10 percent year-over-year in the fourth quarter, touching the $43 million mark (roughly Rs. 560 crore).