SEC subpoena targets Robinhood’s crypto business

Financial services company Robinhood Markets received a subpoena from the U.S. Securities and Exchange Commission (SEC) regarding the company’s crypto custody services and supported cryptocurrency assets on its platform. 

In a form 10-k filing with the SEC, Robinhood revealed that the company received the subpoena from the SEC in December 2022. The subpoena, according to Robinhood, seeks to investigate Robinhood Crypto’s (RHC) — the firm’s subsidiary — “cryptocurrency listings, custody of cryptocurrencies, and platform operations.”

Robinhood receives two subpoenas 

Robinhood currently has 18 crypto assets listed on its platform, which include bitcoin, dogecoin, ethereum, shiba inu, ethereum classic, bitcoin cash, among others. In January 2023, the company delisted bitcoin satoshi vision (BSV). 

“To the extent that the SEC or a court determines that any cryptocurrencies supported by our platform are securities, that determination could prevent us from continuing to facilitate trading of those cryptocurrencies (including ceasing support for such cryptocurrencies on our platform). It could also result in regulatory enforcement penalties and financial losses in the event that we have liability to our customers and need to compensate them for any losses or damages.”

Excerpt from Robinhood filing

Robinhood also got subpoenaed by the office of the California Attorney General, regarding the firm’s trading platform, token listings, customer assets custody, and customer disclosures. The company meanwhile, said it is complying with the investigation. 

The SEC investigative subpoena came shortly after the once major crypto exchange FTX, filed for Chapter 11 bankruptcy in the United States in November 2022, following a string of other cryptocurrency bankruptcies earlier in 2022.

In January 2023, the US Department of Justice (DoJ) seized over 55 million Robinhood shares linked to the bankrupt FTX and worth $460 million at the time of seizure. However, Robinhood is trying to buy back the shares, whose ownership is contested by former FTX boss Sam Bankman-Fried, FTX creditor Yonathan Ben Shimon, and bankrupt crypto lender BlockFi.