The popular stock and cryptocurrency trading platform Robinhood has reportedly paid a $70 million settlement to the Financial Industry Regulatory Authority (FINRA) on Wednesday after being accused of misleading customers.
Bloomberg reports that the free stock and cryptocurrency trading app Robinhood was recently accused of hurting the same small-time investors that it initially aimed to empower. Wall Street’s self-funded watchdog, FINRA, accused Robinhood of misleading its customers in 2016, resulting in a settlement of almost $70 million from the firm.
The settlement included a $57 million fine and around $12.6 million in payments to aggrieved Robinhood customers. The settlement comes following Robinhood’s meteoric rise during the coronavirus pandemic and the frenzy over stocks such as Gamestop that brought the realm of retail trading to the forefront of mainstream financial media.
The settlement comes at a crucial moment as Robinhood prepares a public offering this year, a move that will require the trust of both small-time investors and mainstream financial institutions.
Although Robinhood was seen for some time as a major threat by Silicon Valley to the Wall Street status quo, FINRA signaled its impatience and frustration with the “move fast and break things” approach taken by Silicon Valley companies.
Complying with rules governing brokerages “is not optional and cannot be sacrificed for the sake of innovation or a willingness to ‘break things’ and fix them later,” said FINRA’s head of enforcement, Jessica Hopper, in a statement.
The agency accused Robinhood of misleading customers, having weak technology oversight, and allowing thousands of users to trade options even though they may not have been suitable candidates. Robinhood, which neither admitted nor denied the allegations, published a blog post on Wednesday saying that it has made improvements to its platform including more than tripling customer-support personnel since March 2020 to about 2,700 employees.
Read more at Bloomberg here.
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