Robinhood Markets receives an SEC notice for alleged securities law violations at the crypto unit

Robinhood Markets Inc. has received a notice from the Securities and Exchange Commission regarding alleged securities law violations at its crypto division.

The company said in a regulatory filing that it has received investigative subpoenas from the SEC on issues including cryptocurrency listings, custody of cryptocurrencies and platform activities.

Robinhood Crypto cooperated with the investigation, the company said.

Last week, the crypto division received a notice from Wells from SEC staff advising the unit that a preliminary decision had been made to recommend that the SEC initiate an enforcement action against Robinhood Crypto for alleged securities law violations.

The filing stated that the possible action could include a civil preliminary action, a public administrative proceeding or a cease and desist order. Possible legal remedies include: a court order, a penalty payment, remission, prejudgment interest, civil fines, and disapproval, withdrawal and restrictions of activities.

“After years of good faith efforts to work with the SEC for regulatory clarity, including our well-known effort to 'come in and register,' we are disappointed that the agency has decided to issue a Wells Notice regarding our U.S. crypto business,” Dan Gallagher, Chief Legal, Compliance and Corporate Affairs Officer at Robinhood Markets, said in a statement on Monday. “We strongly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to clarify how weak a case against Robinhood Crypto would be, both on the facts and of the law.”

The company said its crypto unit has opted not to list certain tokens or offer products, such as lending and staking, that the SEC previously alleged were securities in public actions against other platforms. It has also sought to register a special-purpose broker-dealer with the agency.

Robinhood said the SEC's development will not affect its customers' accounts or the services it provides. The company will announce its quarterly results after the market closes on Wednesday.

Shares of Robinhood added 1% in morning trading.

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