The SEC could sue Robinhood as its investigation into security breaches continues

The Securities and Exchange Commission (SEC) continues its investigation into cryptocurrency exchanges and could sue Robinhood Markets.

The SEC, in its role as the agency responsible for regulating securities markets and protecting investors, could sue US-based Robinhood Markets over alleged securities violations in the popular crypto app. In a recent SEC filing dated May 4, Robinhood Markets Chief Financial Officer Jason Warnick confirmed that Robinhood Crypto has received investigative subpoenas from the SEC regarding its “cryptocurrency listings, cryptocurrency custody, and platform operations.”

This comes after months of investigations into suspected security breaches, with which Robinhood has so far cooperated. However, according to the filing, the SEC sent a Wells notice on Monday, May 6, telling the crypto app that the agency had made an “interim decision” and recommended that it file an enforcement action said Robinhood Crypto violated the Securities Exchange Act of 1934.

What does filing with the SEC mean?

If an enforcement action is filed, the next steps could include a civil injunction, administrative action and/or injunctive relief, the lawsuit states.

Robinhood publicly responded to the SEC filing on May 6 with a statement from Dan Gallagher, the app’s chief legal, compliance and corporate affairs officer, writing that he was “disappointed.”

“We firmly 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 a case against Robinhood Crypto is both factually and legally would be,” he explained.

Last June, Gallagher testified before Congress that 18 months of discussions with the SEC had not helped Robinhood understand how to properly register its crypto trading business. While the company maintains that no security breaches occurred, it described the situation on its website in December 2023 as “a world of confusion surrounding crypto.”

Featured Image: Unsplash