Robinhood gets SEC warning against crypto unit for alleged violation of Securities Act
|- Robinhood says it received a “Wells Notice” from the US Securities and Exchange Commission on May 4.
- The exchange platform has reportedly cooperated with the investigation.
- The SEC alleges a violation of the Securities Exchange Act in the exchanges’ crypto operations.
The Securities and Exchange Commission (SEC) is investigating the exchange platform Robinhood Crypto, LLC. The exchange said Monday that it has received investigative subpoenas on crypto listings, custody of cryptocurrencies and platform operations.
The exchange received a Wells Notice from the SEC in which the US financial regulator alleges a violation of Sections 15(a) and 17A of the Securities Exchange Act of 1934.
Robinhood crypto unit sees legal action from the SEC
The US SEC has issued a Wells Notice to Robinhood’s US-based crypto unit, per May 4 court filings. The securities regulator’s notice is a letter showing the conclusion of the SEC’s investigation, outlining the alleged infractions that the regulator has found out.
The SEC filing shows that the regulator is investigating Robinhood’s crypto listings, and crypto custodian operations. It also signals that the regulator is considering to carry on enforcement actions for alleged violation of the Securities Act.
In a blog post on Monday, Chief Legal Officer at Robinhood says the exchange made attempts to work with the SEC for regulatory clarity, but these attempts failed. Robinhood said it is “disappointed” that the SEC has decided to issue a Wells Notice to the US crypto business unit of the exchange.
The SEC alleges that Robinhood’s crypto business units violated Section 15(a) – which addresses a broker’s registration with the regulator – and Section 17A, regarding the requirements for registered transfer agents to process securities transfers, safekeeping of investor and issuer funds and securities, and maintaining records of investor ownership.
The regulator’s next steps may involve a civil injunctive action, namely a trial, and/or a cease-and-desist proceeding, penalties and limitations on the exchange’s activities.
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