- Robinhood settles FINRA probe for $29.75M over AML, compliance, and trade disclosure failures.
- Robinhood’s crypto trading revenue surged 200% to $358M, with volumes hitting $71B in Q4 2024.
- Despite regulatory fines, Robinhood posted a record $916M net income and over $1B in revenue.
For the purpose of resolving several Financial Industry Regulatory Authority (FINRA) investigations, Robinhood has agreed to pay $29.75 million. Deficiencies in its oversight and compliance procedures are the cause of the settlement. The settlement figure consisted of a $26 million civil fine and $3.75 million restitution to customers, FINRA said on March 7. According to FINRA, Robinhood violated anti-money laundering laws and supervision and disclosure requirements because it did not “respond to red flags of potential misconduct.”
Robinhood Faces Scrutiny Over Clearing System Oversight
Despite observable processing delays brought on by increased demand between March 2020 and January 2021—the period when Robinhood restricted trading in so-called meme stocks like GameStop (GME) and AMC Entertainment Holdings (AMC)—FINRA determined that Robinhood Financial had failed to reasonably supervise its clearing system.
The inquiry also showed that Robinhood created thousands of accounts without adequately confirming the identities of its clients. FINRA found that the company’s anti-money laundering procedures were ineffective in stopping fraudulent activity. Accounts were consequently opened under dubious conditions without any investigation.
Compliance Failures in Social Media and Trade Disclosures
Another compliance issue stemmed from Robinhood’s failure to monitor and retain social media communications. The firm promoted posts from paid social media influencers without ensuring accuracy or fairness in their claims. Some promotional content included misleading or unbalanced statements, which misrepresented investment risks to the public.
Additionally, Robinhood converted market orders into limit orders using a practice known as “collaring,” without providing customers with full or accurate disclosures. The company’s failure to inform customers properly resulted in the $3.75 million restitution portion of the settlement.
Regulatory Challenges Amid Financial Growth
This follows only two months after two Robinhood entities settled with the US securities regulator for $45 million on January 13, following an investigation that alleged the company breached over 10 provisions of securities law.
Robinhood Financial and Robinhood Securities “acknowledged specific findings” in that investigation, which alleged that they did not adequately retain and preserve electronic communications from customers during 2020 and 2021, among other issues.
At the same time, Robinhood announced a company-high net income of $916 million and more than $1 billion in revenue during the fourth quarter of 2024. Crypto income represented $358 million of Robinhood’s $672 million transaction-derived revenues — a 200% increase compared to the previous year — while crypto trading volumes surged 450% year-on-year to reach $71 billion.
The recent settlement with Robinhood highlights the ongoing regulatory review of its compliance practices. Due to supervisory flaws, trading restrictions, and failures to verify user accounts, the company continues to face sanctions. However, despite regulatory obstacles, its strong financial results show continued expansion. As Robinhood navigates these legal issues, investor confidence in its operational stability remains a critical factor moving forward.
