Crypto exchange Robinhood will pay up to $10 million to settle “main street” investors affected by the technical hitch it encountered in March 2020.
According to an update by the California Department of Financial Protection and Innovation (DFPI), the outage hindered users from trading the market during times of volatility, resulting in severe losses on investments.
Further investigations by the state regulator revealed that Robinhood failed to exercise due diligence to approve options trades, file an official report to a regulator, and supervise its critical equipment for servicing its customers, which led to the equipment failing to provide core services in intense market volatility.
“Today’s multistate agreement represents states at their best—working together for the benefit of Main Street investors. Robinhood repeatedly failed to serve its clients, but this settlement makes clear that Robinhood must take its customer care obligation seriously and correct these deficiencies,” North American Securities Administrators Association President Andrew Hartnett said.
Robinhood Working Closely With Regulators
The DFPI confirmed that Robinhood is cooperating with the regulators’ investigations. Robinhood’s head of government affairs, Lucas Moskowitz, also stated that the exchange is resolving the issue amicably.
Moskowitz stated that the issue was in the past, and the exchange has improved well enough since then. According to him, Robinhood has invested heavily towards providing a 24/7 customer care service, provided better education and technicality to its backend technicians, and evolved in its supervision of operational technologies.
The incident that led to the lawsuit emanated in March 2020, when the crypto market was booming. Robinhood’s trading platform suffered a technical hitch and was down for a full trading day, causing investors to sue the company angrily.
Robinhood will Attest to Compliance One Year Later
The DFPI noted that Robinhood would provide settling states access to a FINRA-ordered compliance implementation report. Alabama, Colorado, California, Delaware, New Jersey, South Dakota, and Texas were the parties to the settlements.
According to the agreement, as stated by the DFPI, Robinhood would testify in the lead state, Alabama, that it fully complies with the FINRA order one year after the settlement date.
