RobinHood Subpoenaed After FTX Collapse, Results Show

Updated: 01 March 2023

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RobinHood markets Inc. has been subpoenaed by the U.S. Securities Exchange Commission (SEC) over its cryptocurrency listings. In a Monday 10-K filing with the SEC, the financial services company said that the Commission was investigating its crypto arm business Robinhood Crypto LLC., the firm behind the popular trading app. This is the latest evidence of the regulator’s deterministic crackdown on crypto trading platforms.

Looks like the SEC is pointing its next arrow at Robinhood.

What is the Sheriff after? I don't think Robinhood even has a staking program, does it?

Robinhood has a LOT of Ethereum though… just saying. https://t.co/qu8IYgsRP0

— Jeremy Hogan (@attorneyjeremy1) February 27, 2023

According to RobinHood, the agency subpoenaed it in December because of its crypto custody services, cryptocurrency listings, and platform operations. The Menlo Park California-based crypto firm discloses potential risks its business may face because of the SEC’s subpoena.

For example, if a court or the SEC says that any of its crypto listings were securities, then the company could be blocked from “continuing to facilitate trading of those cryptocurrencies (including ceasing support for such cryptocurrencies on our platform),” said RobinHood in the filing.

At the moment, the exchange lists 18 cryptocurrencies on its platform, including Bitcoin (BTC), Ethereum (ETH) and Dogecoin (DOGE). Investors can buy as little as $1 worth of crypto to get started.

A subpoena is a legal document requiring a person to appear before a judge to testify or produce some documents important to the case while the investigation is still going on.

This is not the first time that Robinhood is being investigated by the U.S. authorities or has been subpoenaed. The company said it was also subpoenaed by the California Attorney General’s office in April 2021 regarding its crypto exchange services, coin listing and customer disclosures. RobinHood said that it was cooperating with state investigators.

Speaking to Decrypto, a RobinHood spokesperson said:

We have nothing additional to share here beyond what is in the filing.

The RobinHood-FTX Nexus

The collapse of Sam Bankman Fried’s empire FTX in November 2022 initiated a string of crypto company failures which sparked a market-wide sell-off. This saw billions of dollars wiped from the cryptocurrency space in less than a week and left creditors facing immense losses.

Not long after, FTX filed for Chapter 11 Bankruptcy protection, which led to interventions from regulators around the globe and cemented the doom the sector was already facing following the collapse of the Terra Ecosystem earlier that year. Investor sentiment in the space was dealt a blow as crypto prices bled under the effects of the crypto winter.

The SEC has since doubled down on its stance that the existing securities laws also apply to digital currencies. The SEC Chair Gary Gensler is cracking down on all the cryptocurrencies and tokens he believes are unregistered securities. He has made it clear that he believes many cryptocurrencies fit the description of a security, except Bitcoin.

SEC Chair Gary Gensler Doubles Down on Stance That Every Crypto Asset Is a Security Except Bitcoin (BTC) https://t.co/bisNuxTlje

— The Daily Hodl (@TheDailyHodl) February 28, 2023

Earlier last month, RobinHood disclosed plans to reclaim its shares from Sam Bankman-Fried’s holding company Emergent Fidelity Technologies because U.S. authorities were in the process of taking hold of its shares tied to the former FTX chief executive officer.

RobinhHood is not the only crypto firm the SEC has on its radar. At the start of the year, the regulator charged Gemini and Genesis for offering unregistered securities. And earlier in February, the Commission fined the San Francisco-based crypto exchange Kraken $30 million for violating securities laws.

After the news of RobinHood being subpoenaed by the SEC, its share dropped 0.6% in the extended session Monday. At the time of writing, $HOOD is hovering around $10.07, up 3.6% in the last 24 hours, according to data from Google Finance.