Robinhood Markets, the popular online brokerage firm, has revealed that it has received an investigative subpoena from the United States Securities Exchange Commission (SEC) over its digital asset business’ crypto listings, custody, and platform operations. The disclosure was made in the company’s 10-K filing, a mandatory annual report for publicly-traded companies.
The company received the subpoena in December 2022, following the bankruptcy filings of several major cryptocurrency trading venues and lending platforms earlier that year, including FTX, Three Arrows Capital, Voyager Digital Holdings, and Celsius Network. Robinhood said it could face sanctions if the SEC or any court determines it has not complied with securities regulations. It could also be prevented from supporting the trading of listed cryptocurrencies if they are determined to be securities. Additionally, the company may have to pay regulatory penalties and compensation to its users.
Despite the SEC’s involvement with Robinhood, there is no indication that the regulator plans to take action against the firm immediately. The company stated that it cooperates with all investigations in its filing. However, if the investigation results in a violation of securities laws, Robinhood could face significant financial and reputational damage.
The news comes on the heels of Robinhood’s crypto division receiving a $30 million fine from the New York District of Financial Services in August 2022 for failing to invest “the proper resources and attention to develop and maintain a culture of compliance.” This latest regulatory scrutiny underscores the challenges faced by companies operating in the fast-evolving crypto industry, as they struggle to navigate complex regulatory frameworks and stay compliant.
Overall, Robinhood’s crypto division has become a significant part of the company’s business, with cryptocurrencies accounting for more than 41% of its revenue in the fourth quarter of 2022. However, regulatory scrutiny, like that from the SEC, could pose a significant threat to its business in the long term.
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