By Joseph Chalfant
Robinhood is required to pay $70 million in fines to the Financial Industrial Regulatory Authority (FINRA), the largest amount ever handed down by the regulator.
The company is required to pay out a fine of $57 million and $12.6 million in restitution to customers who incurred damages during the outages of March 2020. Robinhood was accused of communicating “false and misleading” information that improperly told customers whether they could trade on margin, errors in account balances, and inaccurate assessment of risks during options trading, according to CNN Business.
“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations,” said Jessica Hooper, FINRA’s enforcement head.
The central focus of the case was the death of Alexander Kearns, a 20-year-old Robinhood user who took his own life thinking that he had owed the company over $730,000. Moments after locking his account out of trading, Robinhood sent Kearns an automated email requesting immediate payment of $170,000 in a margin call. In reality, Kearns didn’t owe the company money, but he was unable to reach customer support other than automated responses, according to CBS News.
Robinhood is required to pay out $7 million to users who experienced similar errors.
FINRA found that the company was engaged in improper behavior since 2017. The company allowed users to engage in trades based on “illogical information.” FINRA claims that Robinhood had a series of outages like the one in March of 2020 dating back to 2018 and continuing into late 2020.
The company is required to pay out $5 million to impacted customers.
Robinhood has been forced to pay numerous fines with regulatory bodies in the past. In 2019, the company was required to pay FINRA $1.25 million for failure to execute trades and $65 million to the SEC in 2020 for misleading the public about its sources of revenue, according to Reuters.
Robinhood will look to move past the controversy as it inches toward the launch of its highly-anticipated IPO.
“We are glad to put this matter behind us and look forward to continuing to focus on our customers and democratizing finance for all,” said a Robinhood spokesman.
