Robinhood discloses Wells notice over its crypto business

Robinhood’s chief legal officer said the notice came after “years of good faith attempts” to work with the SEC

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Robinhood CEO Vlad Tenev | Permissionless I by Blockworks

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Robinhood Crypto has received a Wells notice from the SEC, according to a Monday disclosure. 

Robinhood, according to an 8K disclosure, said that the US securities regulator had probed “among other topics, RHC’s cryptocurrency listings, custody of cryptocurrencies, and platform operations.”

The company received the notice Friday. The SEC uses Wells notices to inform investigation subjects about pending enforcement actions. 

According to Robinhood, the stock and crypto trading app company faces an enforcement action stemming from alleged violations of the Securities Exchange Act. 

“The potential action may involve a civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding and may seek remedies that include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, and censure, revocation, and limitations on activities,” Robinhood said

The company said it had cooperated with the SEC’s investigation so far. 

“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business,” Dan Gallagher, Robinhood’s chief legal and compliance officer said in a statement. 

“We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law,” Gallagher continued. 

A spokesperson for the SEC told Blockworks that the regulatory doesn’t comment “on the existence of nonexistence of a possible investigation.”

The firm is set to announce earnings on Wednesday.

Read more: Robinhood reports crypto revenue of $43M in Q4

Robinhood’s reveal represents the latest Wells notice issued by the SEC to a firm that does business in crypto. Last month, Uniswap said it was served a Wells notice.

The company has previously disclosed subpoenas probing its crypto products, according to a 2022 filing with the SEC. 

“In connection with the Early 2021 Trading Restrictions, we and our employees, including our co-founder and CEO, Vladimir Tenev, have received requests for information, and in some cases, subpoenas and requests for testimony” from various government agencies, including the SEC, the filing said.

The firm was also charged with “repeated misstatements” about revenue sources, which resulted in Robinhood paying $65 million to settle with the SEC. 
In 2022, the company’s crypto segment was accused of anti-money laundering and consumer protections violations by the New York Department of Financial Services. It ended up paying a $30 million penalty.

Consensys was also allegedly served with a Wells notice, according to a suit it filed against the SEC in a Texas court. 

Read more: Is the SEC weighing a lawsuit against Consensys?

Both Uniswap and Consensys have come out against the SEC, with the latter saying that its notice represented the “latest example of aggressive SEC regulatory overreach.”


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