Trading app Robinhood subpoenaed by the US regulators over digital assets

Updated: 01 March 2023

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The US SEC’s crypto crackdown has already seen the regulator target a number of projects, but also companies that work with digital assets. Recently, a popular trading platform Robinhood Markets also emerged as one of the companies that received some sort of penalty from the regulator.

Robinhood admitted to receiving an investigative subpoena from the Securities and Exchange Commission (SEC) over crypto listings, custody services, as well as platform operations. The US securities watchdog actually targeted the platform back in December 2022, only about a month after FTX filed for bankruptcy.

The trading platform explained this in a 10-K filing, stating that FTX started an avalanche of crypto trading venues and lending platforms filing for bankruptcy. Voyager Digital Holdings was another entity that ended up losing its foothold, and so did Celsius Network, and Three Arrows Capital, all of which were major firms in the industry.

Robinhood said that the investigative subpoena came in response to all the crypto bankruptcies from last year, noting that “In December 2022, following the 2022 Crypto Bankruptcies, we received an investigative subpoena from the SEC regarding, among other topics, RHC’s supported cryptocurrencies, custody of cryptocurrencies, and platform operations.”

Robinhood has been in a similar situation before

This is not the first time that Robinhood has been targeted for its work with digital assets. According to the company, in April 2021, ht received subpoenas from the California Attorney General’s Office, which wanted information about Robinhood’s crypto arm, its trading platform for digital coins, business and operations, coin listings, and custody of assets.

"Robinhood Crypto, the digital currency unit of Robinhood Markets, is being investigated by the New York State Department of Financial Services. The California attorney general is also looking into the crypto arm."https://t.co/oXiQVbPHdX

— Justin Coleman 🎈📌 (@DemopJ) July 7, 2021

Apart from that, Robinhood’s crypto division also received a $30 million fine by the New York District of Financial services. This happened on August 2nd, and the authorities explained it as failing to develop and maintain an adequate culture of compliance.

The brokerage was even targeted by the Massachusetts Securities Division back in August 2021, reportedly for targeting inexperienced investors.

By trying to block Robinhood, the Massachusetts Securities Division is attempting to bring its residents back in time and reinstate the financial barriers that Robinhood was founded to break down.

— Robinhood (@RobinhoodApp) April 15, 2021

Typically, investigative subpoenas are issued by courts after another person or entity requests them in order to obtain information. The information is usually something that the platforms do not tend to share, but is necessary in order to make a decision whether or not a legal action is necessary against the person or entity that is being targeted.

In other words, Robinhood is not yet facing a lawsuit, but the regulators are seeking information that will help them determine what to do moving forward. For the time being, Robinhood has not commented on the matter, apart to explain what happened.

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