Robinhood could be facing $10m fraud fine for failing to properly disclose revenue

From: RegTech Analyst

Stocktrading platform Robinhood could reportedly be facing a $10m fraud fine for failing to properly disclose revenue, pending the outcomes of an ongoing Securities and Exchange Commission probe.

The Wall Street Journal broke the story after speaking with sources familiar with the investigation that was said to be in the advanced stages.

The investigation is about Robinhood’s failure to fully disclose its practice of selling clients’ orders to high-speed trading firms.

Robinhood could face a $10m fine or more if it settles with the SEC. However, the Wall Street Journal’s sources said a deal was unlikely to be announced this month.

This is the latest migraine for Robinhood, which completed a $200m Series G round in August that saw its valuation jump to $11.2bn.

The company has faced many negative headlines over the years, including several service outages that cost their clients thousands of dollars, insecurely store users passwords and not properly communicating the risk of trading with stocks to its clients.

In late 2019, it was also revealed that Robinhood users had exploited the so-called “infinite money cheat code” that enabled them to use a bug in the system to get access to unlimited resources for their investment.

Essentially, the users exploited the bug that enabled them to borrow money through the Robinhood Gold service. The money was then added to their capital, which in turn meant that they could borrow money to be able to borrow more money.

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