Bitcoin should be treated as serious assets. Therefore, I’m suing Robinhood.

TL;DR

Robinhood arbitrarily sold all of my Bitcoin against my will. I’m looking for legal ramifications.

Full Story

I used Robinhood for both stock and crypto trading. From the beginning, I was aware that Robinhood Brokerage account (operated by Robinhood Financial LLC) and Robinhood Crypto account (operated by Robinhood Crypto LLC) are separate accounts. Last month I requested a full ACAT transfer from my Robinhood brokerage account to another brokerage. I know crypto can’t be transferred so I intended to use Robinhood to store my cryptos for now until they support crypto transfer.

Two days later, I got an email from Robinhood saying that they will force liquidate my Bitcoins after my ACAT transfer is complete, and both my Robinhood brokerage and Robinhood crypto accounts will be closed. I immediately contacted Robinhood support and stated in writing that I do not want to sell any of my Bitcoins and I do NOT authorize Robinhood to force liquidate my Bitcoin. A day later, Robinhood support replied and agreed to hold my Bitcoins for now and escalated this to the management. I appreciated her help and have offered to provide my Bitcoin address so they can transfer my Bitcoin to me if they really want to close my account.

I did not hear back from Robinhood support ever again on the resolution for two weeks. During this time, the stock transfer is complete, my Robinhood account was deactivated and I was not able to perform any operations. Two weeks later, on this Friday morning, I received an email stating that all of my crypto positions were force liquidated. I did not receive any communication from Robinhood on why they made this decision and what changed.

Here is what I think is wrong with this situation:

• Robinhood brokerage account and crypto account are separate. In their crypto disclosures, they stated that in case of full ACAT transfer from Robinhood brokerage account, Robinhood has the option to either reject this transfer or accept and liquidate the crypto account. However, I have explicitly communicated that I do not authorize them to sell my Bitcoin, and the liquidation happens two weeks after the transfer. Robinhood’s decision is not only against my will, but also arbitrary:
  • It is not an action required by any regulations;
  • It is not a definitive action outlined in their user agreement.
  • there was no communication on why they needed to sell it.
  • If we allow this from Robinhood, then any crypto exchanges, custodian services will be able to do the same.
• Again, on their crypto account user agreement, they stated that in case of account closure, they can ask for crypto addresses to transfer the crypto assets over. I wasn’t given this option. They failed to fulfill their own user agreement.
• From the SEC guidelines: “ Your old firm is required to transfer whatever securities or assets it can through ACATS and ask you what you want to do with the others. You generally have two choices: either sell the non-transferable security and transfer the cash, or leave the security with your old firm. Sometimes, you may be able to take possession of the security itself.” This, to me, looks like a violation of the guidelines.
• Most importantly, they have sold my crypto assets against my will.

Why am I doing this?

I’m a firm believer in Bitcoin. Admittedly, I suffered a financial loss from this action -- most of the Bitcoin were held for only 20 days away from 1 year. I’ve been DCA since 2018. I’m in it for the long haul and I have never sold a single satoshi. Today, I feel my dream is shattered -- there will be a few days for Robinhood cash to settle, then it will be (force) transferred to my other brokerage, then from there it will again take a few days to be available to withdraw to Coinbase. I do not know what Bitcoin price will be after 2 weeks. Even if the price is unchanged, I will need to leave half of the cash out for tax (I live in a high tax state). In the best case, my bitcoin positions will be cut in half.

But what’s really bothering me, is that I believe Bitcoin should be respected as a serious asset. Robinhood was the first stock broker that offered crypto trading in 2018, yet not only do they not respect their users, they do not treat Bitcoin as a serious asset. Think of it this way: would a real estate agent ever force selling his/her client’s house? Would a stock broker ever be allowed to force liquidate non-leveraged accounts? Would a bank be allowed to make unauthorized purchases without client’s permission? Why should Robinhood be allowed to force selling my Bitcoin? If I do not take actions, then in the future, any crypto exchanges, crypto brokers and crypto custodian services would be allowed to sell their client’s crypto assets at will.

I just began to reach out to local lawyers on this matter. I’m writing on this sub to tell people: please don’t use Robinhood for crypto. Robinhood needs to be held accountable for their actions. I’m also looking for pro-bitcoin lawyers who are familiar with brokerage laws. Please do not hesitate to reach out if that is you. I believe the outcome of this case will establish what Bitcoin is: is it a ponzi scheme that any brokerages can liquidate arbitrarily without permission from their clients, or it is a serious asset that should be respected?

I will fight for myself.

I will fight for Bitcoin.