- The firm revealed the investigative subpoena was related to its cryptocurrency listings, custody services, and platform operations.
- The SEC probe on Robinhood came shortly after the crypto empire FTX imploded in November.
On February 27, financial trading app Robinhood Markets disclosed that it was subpoenaed by the Securities and Exchange Commission in December.
In its latest 10-K filing with the SEC, the firm revealed the investigative subpoena was related to its cryptocurrency listings, custody services, and platform operations.
“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’s statement reads.
The SEC probe came shortly after crypto empire FTX imploded and filed for bankruptcy in November, triggering a ripple effect and meltdown across the Web3 space. Robinhood’s association with FTX goes way long back. In May, FTX founder Sam Bankman-Fried took a 7.6% stake in Robinhood worth $648 million in the belief that the shares “represent an attractive investment.”
As FTX filed for bankruptcy, Bankman-Fried’s Robinhood stake became the biggest liquid line item on his balance sheet that he could potentially sell. SBF is now arguing that he should retain control of around $450 million in shares of Robinhood Markets (HOOD),
In its filing, Robinhood had stressed that if the SEC or a court determines any cryptocurrencies it supports are securities, the firm will be forced to stop trading those cryptos. SEC Chair Gary Gensler had always emphasized that most crypto tokens are securities that fall under the SEC’s jurisdiction. The latest move on Robinhood is part of the SEC’s increased efforts to crack down on crypto firms for investor protection.
Earlier this year, SEC slapped leading crypto firms Genesis and Gemini with charges for offering unregistered securities. The regulatory body recently hit San Francisco-based crypto exchange Kraken with a $30 million fine for violating securities laws.SEC had accused Kraken of failing to register the offer and sale of their crypto-asset staking-as-a-service program.
Apart from the latest SEC probe, Robinhood has come under regulatory scrutiny several times over the years. In 2021, Robinhood received similar subpoena requests from the California Attorney General’s office regarding its trading platform, custody of customer assets, customer disclosures, and coin listing.
Last year, the New York Department of Financial Services, or NYDFS, fined Robinhood’s cryptocurrency arm $30 million for alleged violations related to anti-money laundering, cybersecurity, and consumer protection laws.