American financial service provider and brokerage firm Robinhood announced it received an investigative subpoena in December from the U.S. Securities and Exchange Commission (SEC) in relation to its trading and cryptocurrency business. The announcement was made by the company in its annual 10-K regulatory filing on February 27.
According to the filing, the SEC is looking to confirm if the online brokerage firm has provided necessary and adequate information to its customers regarding its investments, custody of cryptocurrencies, cryptocurrency listing, and trading operations.
This is coming at the time when the SEC increased its scrutiny on crypto industry players following several bankruptcies in 2022, like FTX, Three Arrows capital, and Genesis Global, amongst others.
The investigative subpoena which is a summon order from a court clearly shows that the firm has a lot of answers it needs to provide to the court, which will help to ascertain if there will be legal action against the firm.
Currently, Robinhood has about 18 cryptocurrencies not excluding Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE), on its trading platform. As such, if the SEC or the court discovers that any of the currencies the platform supports are securities under U.S. law, there will be legal or regulatory actions.
Hence, the brokerage firm will be stopped from making use of any of the said cryptocurrencies for trading activities.
Meanwhile, this is not the first time the regulator is launching a probe into the renowned investment platform. Recall that in August 2022, the California-based broker was fined $30 million by the New York State Department of Financial Services (NYDFS) for allegedly violating regulations related to cybersecurity, anti-money laundering, and consumer protection.
SEC Crackdown on “Unregistered Securities”
The investigative subpoena on the American financial service provider continues a broader crackdown on the industry by the SEC, especially for offerings it considers securities. Earlier in the month, Paxos, the issuer of Binance-backed stablecoin BUSD received a Wells Notice from the SEC informing it of a possible enforcement action for listing the token it classified as an unregistered security.
Kraken, another crypto platform, was also fined $30 million for its failure to register the offer and sale of its crypto-staking programs.
Likewise, Robinhood was fined $1.25 million by the Financial Industry Regulatory Authority (FINRA) for failing to ensure the best execution of customers’ orders when routing them to four broker-dealers.
