Robinhood to Pay $29.75 Million to Settle FINRA Claims

Online broker Robinhood has agreed to pay a $29.75 million penalty to settle claims by FINRA related to oversight and compliance violations.

Of the total amount, $26 million constitutes a civil penalty, while $3.75 million is allocated for client compensation.

According to FINRA, Robinhood failed to address “red flags of potential misconduct,” leading to violations of anti-money laundering, oversight, and disclosure rules.

An investigation revealed that from March 2020 to January 2021, the platform did not maintain adequate control over its clearing system. This period coincided with a surge in demand for brokerage services and the restriction of trading in GameStop (GME) and AMC Entertainment Holdings (AMC) stocks.

Robinhood did not detect manipulative trades, suspicious fund movements, and instances of client account breaches. The regulator also found that the company opened “thousands of accounts” without proper user identity verification.

FINRA noted that the platform failed to establish and implement adequate anti-money laundering measures and violated norms when dealing with social media content. Publications promoted through affiliated bloggers contained misleading and biased statements.

The client payments are related to the improper execution of trade orders: Robinhood converted market orders into limit orders, resulting in distorted data for users.

Robinhood agreed with FINRA’s findings without admitting or denying the allegations.

In May 2024, the U.S. Securities and Exchange Commission warned the company of potential securities law violations, and on February 24, 2025, dropped the claims.