Massachusetts plans to sue Robinhood for alleged violation of state laws and regulations not related to crypto.
Massachusetts securities regulators are reportedly preparing to file a complaint against a major cryptocurrency-friendly trading platform, Robinhood.
According to a Wednesday report by the Wall Street Journal, Massachusetts regulators alleged that Robinhood’s marketing illegally targeted inexperienced investors.
According to a final draft of a 20-page administrative complaint reviewed by the WSJ, the enforcement arm of the Massachusetts Securities Division said that Robinhood exposed Massachusetts investors to “unnecessary trading risks” by “falling far short of the fiduciary standard.” The authorities expect to file the complaint on Wednesday, the report notes.
According to the WSJ, the complaint came from the office of William Galvin, the secretary of the Commonwealth of Massachusetts. Galvin reportedly said that his office filed the complaint to protect young Massachusetts investors. Robinhood’s trading platform is “presented as some sort of game that you might be able to win,” he said. Robinhood reportedly had nearly 500,000 customers in Massachusetts as of early December, with accounts totaling over $1.6 billion.
A spokesperson at Robinhood told Cointelegraph that the firm has not seen the complaint:
“Robinhood has opened up financial markets for a new generation of people who were previously excluded. We are committed to operating with integrity, transparency, and in compliance with all applicable laws and regulations. We have not seen the complaint, but we have and will continue to work closely and cooperatively with all of our regulators.”
As of publication, the courts had not registered receipt of the complaint.
Robinhood has experienced a troubled 2020. In June, Forbes broke a tragic story of the death of 20-year-old Alex Kearns, who committed suicide after seeing a $730,000 negative balance on his Robinhood app. Robinhood founders subsequently released a statement pledging to tighten eligibility criteria, educational resources and upgrades to its user interface for customers trading.
The platform has also suffered some technical issues this year. As Cointelegraph reported, Robinhood faced multiple outages in March, resulting in downtime for several services and large losses by traders. A group of affected users subsequently filed a class-action lawsuit against Robinhood, accusing the platform of leaving its users unable to execute trades or change limit orders.