Robinhood is one of the most popular trading platforms to be used by millennials and has introduced cryptocurrency to the millions of new traders. The application has gained popularity because it boasts a friendly “gamified” interface that offers commission-free trades of stocks, bonds, and cryptocurrencies with one-push investing, referral bonuses, and push notifications.
According to recent reports, Robinhood is now facing a civil fraud investigation brought about by the Securities and Exchange Commission (SEC) over its ties with high-speed trading firms like Citadel Securities and Two Sigma Securities, as it supposedly failed to disclose this information with its customers.
The investigation is reportedly at an advanced stage and the trading company could be looking at a fine of more than $10 million if it agrees to settle with the SEC’s probe.
However, no such deal is expected to be announced this month as there has been no formal negotiation between the SEC and Robinhood yet.
An investigation conducted by Forbes states that Robinhood’s business has mostly been developed around selling its customers’ orders—known as “payment for order flow”—to Wall Street’s most notorious sharks, which accounts for 70% of its $130 million in revenue during the first quarter.
A Robinhood spokeswoman declined to comment but said:
“We strive to maintain constructive relationships with our regulators and to cooperate fully with them.”
A rough 2020 for Robinhood
This is one of the many setbacks the platform has faced this year as there have been multiple outages that prevent customers from accessing the platform.
As previously reported by The Daily Chain, the company also dropped its highly anticipated U.K. launch back in July without any clear explanation as to why.
Furthermore, there were several controversies arising from the suicide of a 20-year-old student from the University of Nebraska after his Robinhood account showed a negative $730,000 cash balance.
However, Robinhood announced last month that it had managed to raise $200mln in a ‘Series G funding’ round while also revealing that it had been valued at $11.2 billion from D1 Capital Partners since its inception in 2013. Amongst cryptocurrency exchanges, South Korean exchange Bithumb was reportedly seized by the Seoul Metropolitan Police Agency for fraud claims.