Robinhood Markets Inc., a Nasdaq-listed company known for its equity and cryptocurrency trading app, has received an investigative subpoena from the US Securities and Exchange Commission (SEC) related to its cryptocurrency trading and handling practices.
The company disclosed this information in its annual 10-K filing on financial performance submitted to the SEC on Monday.
The subpoena is related to Robinhood’s “cryptocurrency listings, custody of cryptocurrencies, and platform operations,” according to the filing.
The company said it received the subpoena in December, as the SEC increased its scrutiny of the cryptocurrency industry following a series of bankruptcies in 2022.
Robinhood said that it has also received similar subpoenas from the California Attorney General’s office about its trading platform, business and operations, custody of customer assets, customer disclosures, and coin listings. The company said it is cooperating with all of these investigations.
In the 10-K filing, Robinhood outlined potential risks to the company should the SEC change its classification of a particular cryptocurrency to being a security.
“Any particular cryptocurrency’s status as a ‘security’ is subject to a high degree of uncertainty, and if we have not properly characterized one or more cryptocurrencies, we might be subject to regulatory scrutiny, investigations, fines, and other penalties,” the filing said.
The SEC has already fined US-based cryptocurrency exchange Kraken $30 million in February for offering its “staking as a service” program, which the agency said was in breach of the Securities Act.
The agency has also charged cryptocurrency lender Genesis Global Capital and cryptocurrency exchange Gemini Trust in January, alleging that the firms’ “Earn” lending program equated to offering and selling unregistered securities.
Robinhood became a popular app for shares and cryptocurrencies due to its low trading fees. However, the company’s crypto earnings fell 24% to $39 million in the fourth quarter of 2022, according to its latest earnings report.
