Cryptocurrency trading platform Robinhood has agreed to pay up to $3.9 million in settlement fees following complaints filed by customers several years ago. The penalties also include new, stricter conduct requirements.

The investigation into Robinhood was prompted by consumer grievances related to questionable practices within its cryptocurrency division.

Robinhood to Pay $3.9 Million to Customers

California Attorney General Rob Bonta announced in a Wednesday press release that Robinhood will pay penalties for denying customers access to their cryptocurrency holdings between 2018 and 2022. The platform also failed to disclose key details regarding its trading and order-handling practices.

Bonta revealed that Robinhood violated the California Commodities Law (CCL) by selling commodities contracts. The company allowed users to buy cryptocurrency with the expectation of value growth but failed to deliver the assets. As a result, customers were forced to sell their holdings back to Robinhood when they couldn’t access their investments.

“Robinhood misled customers by advertising it would connect to multiple trading venues, to ensure customers receive the most competitive prices between the venues, which was not always true. Robinhood also represented to its customers that Robinhood itself held all its customers’ cryptocurrencies purchased through Robinhood’s platform. Despite these assurances, Robinhood did not tell customers that there were instances in which it arranged for trading venues to hold customer assets for extended periods,” the California AG wrote.

Read more: How to Buy and Sell Crypto on Robinhood: A Step-by-Step Guide

The Wednesday settlement officially closes the investigation into Robinhood’s violations of the California Commodities Law (CCL). Bonta cited the state’s consumer protection laws, which safeguard residents against misrepresentation, including by cryptocurrency companies. The settlement also includes stringent conduct requirements for the platform moving forward.

Additionally, the US Securities and Exchange Commission (SEC) investigated Robinhood’s cryptocurrency operations, issuing a Wells Notice signaling potential enforcement actions. While the company expressed disappointment, with Chief Legal Officer Dan Gallagher referencing their prior good faith efforts, Robinhood has made strides toward compliance, including applying to register as a special-purpose broker-dealer under SEC regulations.

Platform Thrives Despite Regulator Woes

Despite ongoing legal challenges, Robinhood remains on a positive trajectory following strong second-quarter (Q2) earnings. In early August, BeInCrypto reported that the platform’s Q2 revenues climbed to $682 million, marking a 40% year-over-year increase, driven largely by crypto and options trading.

Notably, crypto revenues skyrocketed by 161% year-over-year, reaching $81 million in Q2 2024. While the company saw a 10% sequential increase in overall net revenues from $618 million in Q1 to $682 million in Q2, crypto transaction-based revenue slightly declined, dropping from $126 million in Q1 to $81 million in Q2.

A crucial factor behind Robinhood’s recent success is its strategic acquisitions and initiatives. In June, the platform acquired European crypto exchange Bitstamp, Ltd., followed by the July purchase of AI-powered investment research platform Pluto Capital Inc. According to Jason Warnick, Robinhood’s Chief Financial Officer, these acquisitions are part of a broader plan to fuel growth.

Read more: Coinbase vs. Robinhood: Which Is the Best Crypto Platform?

However, following news of the $3.9 million penalty, Robinhood’s stock (HOOD) dropped 1.34%, trading at $19.11 as of 2:30 a.m. ET.