Robinhood Markets Inc (NASDAQ:HOOD) received a subpoena in December 2022 from the US Securities and Exchange Commission (SEC) related to listing and custody of cryptocurrencies on its subsidiary, Robinhood Crypto, the hybrid trading platform has disclosed.
The probe forms part of a major push by the US securities regulator into the cryptocurrency sector following a year of unprecedented turmoil that saw the collapse of former crypto titans FTX, Terraform Labs, Three Arrows Capital and many more.
The regulatory agency has maintained that pre-existing securities laws apply to digital assets and that many crypto tokens meet the definition of a security.
Recent actions saw the SEC impose a US$30mln fine on the Kraken crypto exchange and a ban on the BUSD stablecoin developed by Binance and Paxos.
It is unclear what the nature of the Robinhood inquiry is, but the company has historical ties to collapsed cryptocurrency exchange FTX and its founder Sam Bankman-Fried.
Bankman-Fried was a major FTX shareholder, purchasing a US$500mln, 7.6% stake in the company in May 2022.
Bankman-Fried’s stake has since been seized by the Department of Justice as part of his criminal fraud proceedings following the FTX implosion.
Earlier this month, Robinhood said it planned to repurchase its shares from Bankman-Fried's company Emergent Fidelity Technologies as prosecutors moved to seize the stake.
Robinhood is also under pressure after it lost US$57mln on December 16 due to an error which allowed users to sell more shares than they actually held in Cosmos Health Inc, sparking a US$0.08 earnings per share shortfall.
Proactive has reached out to Robinhood for further details.