US broker Robinhood (NASDAQ:HOOD) announced that its Robinhood Crypto LLC unit received a Wells notification from the staff of the US Securities and Exchange Commission, stating that they will recommend that the Commission take enforcement action.
More formally, Robinhood Crypto has received investigative subpoenas from the SEC regarding, among other issues, its cryptocurrency listings, cryptocurrency custody, and platform operations. Robinhood said it has cooperated with this investigation.
The SEC Staff’s “Wells Notice” states that the Staff has advised that it has made a “preliminary determination” to recommend that the SEC file an enforcement action against Robinhood Crypto, alleging violations of Sections 15(a) and 17A of the Act Securities Exchange Act of 1934, as amended. Potential action may include a civil insurance action, public administrative proceeding and/or cease and desist proceeding and may seek remedies including injunction, cease and desist order, relief, prejudgment interest, civil money penalties and censures, revocation and limitations in the activities.
Robinhood’s head of legal, compliance and corporate affairs, Dan Gallagher, said in an official response,
“After years of good-faith efforts to work with the SEC for regulatory clarity, including our well-known effort to ‘come in and sign up,’ we are disappointed that the agency has decided to issue a Wells Notice regarding the US crypto business.
“We strongly believe that the assets listed on our platform are not securities, and we look forward to working with the SEC to make clear how weak any case against Robinhood Crypto would be on both the facts and the law.”
Robinhood Crypto said in response that it has made difficult choices not to list certain tokens or provide products, such as lending and staking, that the SEC previously claimed were securities in public actions against other platforms. In addition, Robinhood said it listened to the SEC’s pleas and sought to register a special purpose broker with the service.
We will continue to follow this story as it develops.