Robinhood Agrees to Pay $30 Million to Settle US Regulator Probes

Robinhood, the popular online trading platform, has agreed to pay a hefty $29.75 million to settle multiple investigations by the Financial Industry Regulatory Authority (FINRA). The settlement addresses several issues related to the company’s compliance and supervisory practices, including failing to respond to numerous “red flags” that indicated potential misconduct.

Settlement Details

The $29.75 million settlement is composed of a $26 million civil fine and $3.75 million in restitution to customers, FINRA announced on March 7. The regulatory body cited a range of violations, including breaches related to Anti-Money Laundering (AML) regulations and failures in supervision and disclosure practices.

FINRA’s investigation found that Robinhood Financial failed to properly oversee its clearing system, despite clear signs of processing delays. These delays occurred between March 2020 and January 2021, a period that coincided with the highly publicized trading restrictions imposed by Robinhood on so-called meme stocks such as GameStop (GME) and AMC Entertainment (AMC).

Key Violations Identified

The investigation revealed several areas where Robinhood’s practices fell short:

• Supervision Failures: Robinhood was found to have failed to adequately supervise its operations, including not detecting or investigating suspicious activities like manipulative trades and unauthorized account takeovers.

• Anti-Money Laundering (AML) Issues: Robinhood did not establish or implement sufficient Anti-Money Laundering programs, which are designed to prevent financial crimes such as money laundering.

• Inaccurate Customer Verification: The company was also found to have opened thousands of accounts without properly verifying the identities of customers.

• Social Media Oversight: FINRA flagged Robinhood for not properly supervising its social media communications, including promotions from paid influencers. Some of these posts were found to be misleading, as they made overly optimistic or imbalanced statements that could mislead investors.

• Market Order Issues: Robinhood also faced scrutiny for providing customers with incomplete or inaccurate disclosures when it converted market orders into limit orders, a practice referred to as "collaring."

Company Response and Ongoing Investigations

In response to FINRA’s findings, both Robinhood Financial and Robinhood Securities consented to the settlement, but they did not admit to or deny the charges. This resolution comes just two months after a separate $45 million settlement in January 2025 with the U.S. Securities and Exchange Commission (SEC). That settlement arose from an investigation into multiple securities law violations, including Robinhood’s failure to preserve customer communications properly between 2020 and 2021.

Strong Financial Performance Amid Regulatory Challenges

Despite the regulatory setbacks, Robinhood has reported impressive financial results. In the fourth quarter of 2024, the company achieved a record net income of $916 million, with total revenues surpassing $1 billion. Notably, Robinhood’s crypto trading business has seen significant growth, with crypto revenues accounting for $358 million of the company’s $672 million in transaction-based revenues, representing a remarkable 200% year-on-year increase. Furthermore, trading volumes for cryptocurrencies surged by 450%, reaching $71 billion over the same period.

This settlement underscores the increasing scrutiny that Robinhood, along with other online trading platforms, is facing from regulatory authorities. As the company continues to grow, both in terms of its financial performance and its customer base, it will likely need to address these compliance issues more proactively to avoid further regulatory challenges.