The US Securities and Exchange Commission (SEC) has subpoenaed trading and brokerage app Robinhood for its crypto services. The company revealed this in an annual financial filing released Monday.
The news is also reported by Watcher.Guru’s official Twitter account, which reads:
JUST IN: 🇺🇸 SEC subpoenas Robinhood $HOOD over #cryptocurrency listings.
— Watcher.Guru (@WatcherGuru) February 27, 2023
Summary
Robinhood concerned about its crypto trading after SEC actions
As anticipated, the SEC filed a subpoena against Robinhood shortly after the FTX debacle.
The high-profile fintech company also acknowledged that the SEC’s legal action could lead to the cessation of digital asset trading on its platform as part of its mandatory list of risks to its business.
As a matter of fact, Robinhood stated the following:
“To the extent the SEC or a court determines that cryptocurrencies supported by our platform are securities, such determination may prevent us from continuing to facilitate trading of such cryptocurrencies (including ending support for such cryptocurrencies on our platform).”
Robinhood said it received the subpoena shortly after cryptocurrency exchange FTX filed for bankruptcy in November. The subpoena covers information on topics such as cryptocurrency listings, cryptocurrency custody, and platform operations.
Robinhood facilitates customer trades for certain cryptocurrencies that have been analyzed under applicable internal policies and procedures and that it believes are not securities under US federal and state securities laws.
This is what the company claims following the filing. Cryptocurrency trading on Robinhood has been a growing line of business over the past 12 months, despite the market downturn.
The investment platform launched its crypto wallet for 10,000 iOS users in September, using Circle’s USDC stablecoin as the main representative fiat token.
The history between the SEC and Robinhood
The company’s CEO, Vlad Tenev, pointed out that the collapse of FTX has led Robinhood to gain more market share. Despite this, cryptocurrency trading and sales declined in the fourth quarter, down 24%, in line with most revenue lines.
However, cryptocurrency trading volumes on the platform recovered in January, jumping 95% as cryptocurrency prices rose across the board. If the SEC takes legal action with Robinhood, it would not be the first time the market regulator has taken the company to court.
The agency actually accused Robinhood in 2020 of misleading customers about sources of revenue. Robinhood agreed to pay $65 million to settle those charges in December 2020.
Robinhood was also hit with a $30 million fine in August as part of a settlement with the New York Department of Financial Services for allegedly failing to comply with anti-money laundering and cybersecurity regulations. The crypto company declined to comment beyond what was in the filing.
Robinhood crypto trading volume increases 95% in January
Robinhood reported crypto trading volumes up 95% in January to $3.7 billion from the previous month. Notional trading volumes, which are the main driver of transaction revenues, were higher in January for stocks, options and cryptocurrencies than in December 2022.
Monthly Active Users (MAU) at the end of January were 12 million, up 600,000 from December. Assets Under Custody (AUC) at the end of January totaled $74.7 billion, up 20% from the end of December.
Net deposits were $1.4 billion in January, which translates into an annualized growth rate of 27% compared to AUC in December 2022. Over the past twelve months, net deposits were $16.9 billion, which translates to an annualized growth rate of 19% over the January 2022 AUC.
Margin balances at the end of January were $3 billion, down $0.1 billion from the end of December 2022. Cash Sweep balances at the end of January were $7.1 billion, up $1.3 billion from the end of December 2022.
Of the $7.1 billion, $6.0 billion was in gold accounts, which was up $1.2 billion from the end of December 2022. In addition, stocks were up nearly 6% at the close.
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