Robinhood Markets Inc. disclosed in a filing late Monday that it had received a subpoena from the U.S. Securities and Exchange Commission (SEC) in December regarding its cryptocurrency listings, custody of cryptocurrencies, and platform operations. The SEC’s inquiry came shortly after FTX Trading Ltd. and other crypto companies filed for bankruptcy.
In the filing, Robinhood noted that if the SEC or a court determines that any cryptocurrencies supported by its platform are securities, they could be forced to cease support for such cryptocurrencies on their platform. This could have a significant impact on their business operations.
The company also disclosed that the board had authorized the repurchase of more than 50 million shares that had been bought by Sam Bankman-Fried, founder of the failed cryptocurrency exchange FTX Ltd., which the Justice Department had seized.
The filing also revealed that Robinhood ended 2022 with $6.3 billion in cash and cash equivalents and $2.91 billion available under credit facilities. The company reported a net loss of $1.17 a share on revenue of $1.36 billion, compared with a net loss of $7.49 a share on revenue of $1.82 billion.
Robinhood shares dropped 0.6% in the extended session Monday after ending the regular trading day up 1.36%. Over the past 12 months, the company’s shares have declined 16.3%, in line with the 16.3% decline by the tech-heavy Nasdaq Composite Index and the 9.2% decline by the S&P 500.
The SEC’s investigation into Robinhood’s cryptocurrency operations is a reminder of the risks associated with investing in cryptocurrency. Cryptocurrency is a highly volatile asset class that is largely unregulated and has been the target of numerous frauds and scams. As such, investors should proceed with caution and do their due diligence before investing in any cryptocurrency.
Investors should also be aware that the SEC has taken a hard stance against companies that fail to comply with its regulations. In the past, the SEC has taken enforcement actions against companies that have failed to register their cryptocurrency offerings or have engaged in other activities that violate its rules.
The SEC’s investigation into Robinhood’s cryptocurrency operations could have serious implications for the company and its investors. If the SEC or a court determines that any cryptocurrencies supported by Robinhood’s platform are securities, the company could be forced to stop supporting them on their platform. This could have a significant impact on the company’s business operations and its ability to generate revenue.
In addition, investors should be aware that the SEC’s investigation could result in fines or other penalties. If the SEC finds that Robinhood has violated any of its regulations, the company could face significant financial penalties, which could have a negative impact on its stock price.
In conclusion, the SEC’s investigation into Robinhood’s cryptocurrency operations is a reminder of the risks associated with investing in cryptocurrency. Investors should proceed with caution and do their due diligence before investing in any cryptocurrency. They should also be aware that the SEC could take enforcement action against companies that fail to comply with its regulations.
