Robinhood, the US-based crypto trading service has found itself under legal issues in the US. Earlier this week, the US Securities and Exchange Commission (SEC) issued a ‘Wells Notice’ against Robinhood. With this, Robinhood has joined the list of several other crypto firms, that have had to face the SEC and explain the intricacies of their business operations. The US authorities want to ensure that its citizens dabbling with digital assets are safeguarded against the financial risks these assets pose.
In the US, a Wells Notice implies that authorities like the SEC are planning to take a legal action against the entity it is issued to, which in this case is Robinhood. The notice shows that, upon investigation, the SEC has acquired reason to believe that Robinhood has violated the US’ securities laws.
“On May 4, 2024, Robinhood crypto (RHC) received a ‘Wells Notice’ stating that the Staff of the SEC has advised RHC that it made a ‘preliminary determination’ to recommend that the SEC file an enforcement action against RHC alleging violations of the Securities Exchange Act of 1934, as amended,” said the official document outlining the development.
As of now, elaborate details about the proceedings on the case remain awaited.
“The potential action may involve a civil injunctive action, public administrative proceeding, and/or a cease-and-desist proceeding and may seek remedies that include an injunction, a cease-and-desist order, disgorgement, pre-judgment interest, civil money penalties, and censure, revocation, and limitations on activities,” the document noted.
Many have critised the SEC for scrutinising the crypto sector by waging legal battles against them one after the other.
Robinhood getting sued by the SEC.
Welcome to the party @RobinhoodApp.
If you were curious as to why Gary and the SEC is so brazen in his attack on crypto it’s because he’s getting order from a deep faction of the US government who’s trying to choke off crypto in the America. pic.twitter.com/ldQ0njTfXp
— RYAN SΞAN ADAMS – rsa.eth :unicorn_face: (@RyanSAdams) May 6, 2024
Aren’t there like… actual securities violations the SEC should be focusing on?
After initially stumbling, Robinhood has become one of the most buttoned-up fintechs out there. The idea that RH is going to cause consumer harm by selling ETH, AVAX, DOGE, or LINK is laughable.… https://t.co/p5YGDRRN0l
— Laura Brookover (@laurabrooksie1) May 6, 2024
The SEC just sent a Wells notice to Robinhood.
The number they’ve sent about crypto in recent months is astonishing. It’s hard to imagine that they would (or could) bring so many enforcement actions at once.
It seems like they’re abusing the Wells process as a scare tactic now.
— Jake Chervinsky (@jchervinsky) May 6, 2024
Previously, the SEC had launched thorough investigations against crypto mammoths like Binance and Coinbase citing legal issues around their respective business operations.
Meanwhile, Robinhood is anticipating a significant spike in its profits and growth quotient. In February, the company reportedly disclosed that the revenue collected from its crypto trading business rose by 10 percent versus a year earlier in the fourth quarter, touching the mark of $43 million (roughly Rs. 560 crore).
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