The SEC Recommends Enforcement Action Against Robinhood’s Crypto Business

Quick take:

• The notice follows investigative subpoenas issued to Robinhood Crypto related to crypto listings, custody of cryptocurrencies, and platform operations.
• The SEC filing published May 4 stated that Robinhood Crypto has co-operated with investigations.
• The notice follows the SEC’s lawsuit against another crypto company Uniswap, last month.

The US Securities and Exchange Commission is filing a lawsuit against Robinhood’s crypto business according to a “Wells Notice” issued on May 4. 

The SEC filing follows investigative subpoenas issued to Robinhood Crypto (RHC) related to cryptocurrency listings, custody of cryptocurrencies, and platform operations.

“On May 4, 2024, RHC received a “Wells Notice” from the Staff of the SEC (the “Staff”) stating that the Staff has advised RHC that it made a “preliminary determination” to recommend that the SEC file an enforcement action against RHC alleging violations of Sections 15(a) and 17A of the Securities Exchange Act of 1934, as amended,” the statement read.

According to the filing, RHC has been cooperative during the investigations. This notice comes just weeks after another crypto company UniSwap Labs was warned of potential enforcement action. Although UniSwap did not indicate in its blog post what the filing was specifically targeting, it did compare the situation to ongoing cases involving the likes of Coinbase, which it deemed as an attempt by the SEC to apply U.S. securities law to the digital asset-related companies.

“Taking into account the SEC’s ongoing lawsuits against Coinbase and others as well as their complete unwillingness to provide clarity or a path to registration to those operating lawfully within the U.S., we can only conclude that this is the latest political effort to target even the best actors building technology on blockchains,” the blog post read.

In Robinhood Crypto’s case, the company is facing a potential civil injunctive action, a public administrative proceeding, and/or a cease-and-desist proceeding.

The US capital markets watchdog also indicated it may “seek remedies that include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, and censure, revocation, and limitations on activities.”

This is the latest in a string of SEC enforcement actions against crypto companies that saw the world’s largest crypto exchange company Binance and Tom Bilyeu’s podcast studio, Impact Theory penalised.

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