Nasdaq-listed Robinhood Markets Inc., which runs the Robinhood equity and crypto trading app, received an investigative subpoena from the U.S. Securities and Exchange Commission (SEC) in December related to its trading and handling of cryptocurrencies, the company said in its annual 10-K filing on financial performance submitted to the SEC agency on Monday.

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Fast facts

  • The investigative subpoena relates to Robinhood’s “cryptocurrency listings, custody of cryptocurrencies and platform operations,” according to the filing.
  • Robinhood said the subpoena was received in December as the SEC increased its scrutiny of the crypto industry following a series of bankruptcies in 2022, including the collapse of Bahamas-based crypto exchange in November.
  • The company said that it had received similar subpoenas from the California Attorney General’s office about its “trading platform, business and operations, custody of customer assets, customer disclosures, and coin listings.” It said it was cooperating with all these investigations.
  • The firm described the SEC subpoena on page 28 of the filing in a section outlining potential risks to the company should the SEC change its classification of a particular cryptocurrency to being a security.
  • “Any particular cryptocurrency’s status as a “security” is subject to a high degree of uncertainty and if we have not properly characterized one or more cryptocurrencies, we might be subject to regulatory scrutiny, investigations, fines, and other penalties,” Robinhood said.
  • The SEC fined U.S. crypto exchange Kraken US$30 million in early February for offering its “staking as a service” program, which the agency said was in breach of the Securities Act. Kraken subsequently shut down its staking service.
  • The agency also charged cryptocurrency lender Genesis Global Capital and crypto exchange Gemini Trust in January alleging the firm’s “Earn” lending program equated to offering and selling unregistered securities.
  • Robinhood became a popular app for shares and cryptocurrencies through its low trading fees. However, the company’s crypto earnings fell 24% to US$39 million in the fourth quarter of 2022, according to its latest earnings report.

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