SEC served subpoena to Robinhood shortly after FTX debacle

The U.S. Securities and Exchange Commission subpoenaed trading app and brokerage Robinhood over its cryptocurrency services, the company disclosed in an annual financial filing posted on Monday. 

The high-profile fintech company also acknowledged that SEC legal action could lead to it ceasing digital asset trades on its platform, as part of its required listing of risks to its business. 

“To the extent that the SEC or a court determines that any cryptocurrencies supported by our platform are securities, that determination could prevent us from continuing to facilitate trading of those cryptocurrencies (including ceasing support for such cryptocurrencies on our platform),” Robinhood said.  

Robinhood said it received that subpoena shortly after crypto exchange FTX filed for bankruptcy in November. The subpoena is for information around topics such as “cryptocurrency listings, custody of cryptocurrencies and platform operations.” 

Robinhood facilitates customer trades for certain crypto that have been “analyzed under applicable internal policies and procedures and that we believe are not securities under U.S. federal and state securities laws,” the firm said later on in the filing.  

Growing business

Crypto trading on Robinhood has been a growing business line over the past 12 months, despite the market downturn. The investing platform launched its crypto wallet to 10,000 iOS users in September, which uses Circle's USDC stablecoin as the primary fiat-representative token. 

The firm's CEO, Vlad Tenev, noted in December the collapse of FTX led to Robinhood gain increased market share. Despite that, crypto trading revenue was down in the fourth quarter, dipping 24% – in line with most revenue lines. Crypto trading volumes on the platform recovered in January, jumping 95% as crypto prices rose across the board. 

If the SEC does take legal action with Robinhood, it would not be the first time the markets regulator has taken the company to court. The agency charged Robinhood in 2020 with misleading customers about revenue sources. Robinhood agreed to pay $65 million to settle those charges in December of 2020. Robinhood was also hit with a $30 million fine in August as part of a settlement with the New York Department of Financial Services for allegedly failing to comply with anti-money laundering and cybersecurity regulations. 

Robinhood declined to comment beyond what was in the filing.