Robinhood Crypto May Face SEC Securities Violation Suit, After Wells Notice

The massive crypto crackdown from the US Securities and Exchange Commission (SEC) may bring its next lawsuit against Robinhood Markets, the renowned fintech company. This was after the SEC sent a Wells Notice, which signifies that it is done with its investigations and that a potential suit about a securities violation may follow for the company's crypto exchange service.

It was argued by the company that it has followed the regulations set by the SEC, including its cooperation amidst the investigation done by the regulatory agency.

Robinhood Crypto May Face SEC Securities Violation Suit

Robinhood revealed via its press release that it received a Wells Notice from the SEC, which the company claimed recommended that the Commission file an "enforcement action."

Robinhood Crypto, the crypto exchange leg of the company built from its renowned fintech and stock trading platform face the potential SEC lawsuit said Ars Technica. This follows the SEC filing which confirmed that Robinhood received subpoenas from the SEC, which asked to look into its crypto listings, crypto custody, and its platform's operations.

The SEC may file a "civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding."

Robinhood: Followed SEC Regulations for Crypto

Dan Gallagher, Chief Legal, Compliance, and Corporate Affairs Officer from Robinhood Markets, claimed that the company followed the SEC and asked for regulatory clarity for its business. "We are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business," he added.

Gallagher previously argued that the SEC was not clear on the regulations for cryptocurrency despite the company asking for them, leaving Robinhood confused about the industry and what to follow.

Robinhood and Its Investment Platform

Robinhood became popular in early 2021 year for the massive stock trading phenomenon, first taking over Reddit and was later done through its platform. The 'meme stock' fame saw a significant rise, and Robinhood was among those who changed the world's trading landscape, with the company rising to a billion-dollar business at its peak.

Later, the company began offering a cryptocurrency wallet within the platform, with Robinhood centering on the Web3 protocol. After a massive demand, it added more after initially seeing two million on its waitlist.

That being said, FTX considered it, at one point, to acquire Robinhood's business and own its services, including stock trading and crypto exchange features.

Following the SEC's massive crackdown on crypto exchanges, including FTX and Binance, Robinhood is now under the regulatory agency's watchful eye. The agency recently finished its investigation. Robinhood expressed its sentiments about its cooperation in the inquiry, and it's following the rules, yet an impending lawsuit may be on its way.