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Robinhood pays $65M to settle SEC charges for past “inferior” pricing execution, misleading customers

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Today, American securities watchdog the SEC announced that Robinhood, a free-to-trade broker that has grown rapidly in recent years, has paid a $65 million fine to settle charges relating to some of its historical business practices. The actions at issue occured between 2015 and 2018, with the SEC alleging that the company “made misleading statements and omissions in customer communications” about how it generated “its largest revenue source” – specifically, payment for order flow.

The SEC also said that the well-funded unicorn “falsely claimed in a website FAQ between October 2018 and June 2019 that its execution quality matched or beat that of its competitors,” when it reality it was executing customer trades at “inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission.”

Robinhood did not admit or deny the SEC charges, per the government body.

Reached for comment, Robinhood’s Chief Legal Officer Dan Gallagher said via email that the $65 million settlement “relates to historical practices that do not reflect Robinhood today.” The company, in a somewhat rare on-the-record statement added that it has “significantly improved [its] best execution processes, and have established relationships with additional market makers to improve execution quality.”

Robinhood listed five execution venues in its most recent payment for order flow filings.

TechCrunch has covered Robinhood’s payment for order flow incomes in recent quarters, as the company has scaled both its userbase and trading volumes, generating growing revenue from how its customer orders are executed.

In Q2 2020, for example, Robinhood’s revenues from payment for order flow sources doubled to around $180 million from a Q1 2020 result of around $90 million. Of course, those numbers come several years after the quarters noted in the settlement announcement.

Update: It’s worth noting that the SEC news comes less than a day after the Massachusetts Securities Division filed a complaint against Robinhood, alleging that it “engaged in acts and practices in violation of the Act and Regulations by aggressively marketing itself to Mass investors without regard for the best interests of its customers and failing to maintain the infrastructure and procedures necessary to meet the demands of its rapidly growing customer base.”

The state is seeking censure of Robinhood, improvement to its governance, along with monetary restitution and other financial penalties. The Massachusetts complaint can be read here.

Impacts

Robinhood has had an explosive, if occasionally rocky year. The company has had bouts of downtime during key market moments, had to reform its options-trading service after the suicide of a user, and has seen growth from its incomes from order flow slow.

But despite those matters, the company’s 2020 trajectory has been little short of impressive. Its rapid revenue helped the company raise hundreds of millions of dollars this year at expanding valuations, and made Robinhood a 2021 IPO candidate.

It’s hard to imagine that today’s news will fuly derail Robinhood’s growth; if the charges had dealt with a historical period more close to the current day, perhaps the impact would be larger. Robinhood’s competitors — Public.com raised $65 million the other day — could capitalize on the news.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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What Musk’s $100 million carbon capture prize could mean

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Tesla CEO Elon Musk, now the world’s richest person with a net worth north of $180 billion, announced on Twitter that he plans to give away $100 million of it as a prize for the “best carbon capture technology.”

He added in a subsequent tweet that he’ll provide more details next week, so it’s not yet clear how such a contest will work or even what technologies might qualify. Carbon capture can refer to methods that prevent greenhouse gas pollution escaping from power plants and factories, or various ways of pulling it out of the atmosphere.

Some startups are developing so called direct-air capture machines that pluck carbon dioxide molecules from the air; these can then be stored underground or used to create carbon-neutral fuels. Other groups are exploring ways of using minerals, trees, plants and soil to pull down the greenhouse gas.

Neither on-site carbon capture or air removal are happening on large scales today, however, principally because they’re highly expensive and there’s limited value for the captured gas right now. But more money and attention is flowing into both areas as the dangers of climate change grow.

Climate models show that vast amounts of carbon removal will be necessary to prevent really dangerous levels of global warming, given how much we’ve emitted and how slowly we’re moving away from fossil fuels. Meanwhile, on-site carbon capture tools may offer promising ways of cleaning up certain tricky sectors, like cement and steel production, or to provide carbon-free electricity from natural gas plants when intermittent solar and wind sources flag.

The number of nations and corporations banking on some level of carbon capture removal is rising sharply as they plan to zero out emissions in the coming decades, creating a growing reliance on expensive or unproven approaches—and thus an imperative to accelerate progress in these spaces.

Musk is far from the first to offer up funds to the field, either as an award or a more direct investment. A year ago, Microsoft announced plans to create a $1 billion fund for “carbon reduction, capture, and removal technologies,” as it looks to cancel out its entire historic emissions. Direct-air capture startups such as Climeworks, Carbon Engineering and Global Thermostat have all raised at tens of millions of dollars of investment. And the CarbonX prize has offered $20 million to companies developing ways to incorporate carbon dioxide into products, in an effort to create bigger markets and greater value for the gas.

Another $100 million could certainly help whatever venture, or ventures, clinch Musk’s prize. But it will also only go so far. Carbon Engineering, for instance, has previously said just one full-scale direct-air capture plant could cost between $300 and $500 million.

Money aside, however, one thing Musk is particularly talented at is drawing attention. And this is a space in need of it.

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Elon Musk is donating $100M to find the best carbon capture technology

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Elon Musk said Thursday via a tweet that he will donate $100 million toward a prize for the best carbon capture technology.

Musk, who recently surpassed Amazon’s Jeff Bezos to become the world’s richest person, didn’t provide any more details except to add in an accompanying tweet the “details will come next week.” It’s unclear if this is a contribution to another organization that is putting together a prize such as the Xprize or if this is another Musk-led production.

The broad definition of carbon capture and storage is as the name implies. Waste carbon dioxide emitted at a refinery or factory is captured at the source and then stored in an aim to remove the potential harmful byproduct from the environment and mitigate climate change. It’s not a new pursuit and numerous companies have popped up over the past two decades with varying means of achieving the same end goal.

The high upfront cost to carbon capture and storage or sequestration (CCS) has been a primary hurdle for the technology. However, there are companies that have found promise in carbon capture and utilization — a cousin to CCS in which the collected emissions are then converted to other more valuable uses.

For instance, LanzaTech has developed technology that captures waste gas emissions and uses bacteria to turn it into useable ethanol fuel. A bioreactor is used to convert into liquids captured and compressed waste emissions from a steel mill or factory or any other emissions-producing enterprises. The core technology of LanzaTech is a bacteria that likes to eat these dirty gas streams. As the bacteria eats the emissions it essentially ferments them and emits ethanol. The ethanol can then be turned into various products. LanzaTech is spinning off businesses that specialize in a different product. The company has created a spin-off called LanzaJet and is working on other possible products such as converting ethanol to ethylene, which is used to make polyethylene for bottles and PEP for fibers used to make clothes.

Other examples include Climeworks and Carbon Engineering.

Climeworks, a Swiss startup, specializes in direct air capture. Direct air capture uses filters to grab carbon dioxide from the air. The emissions are then either stored or sold for other uses, including fertilizer or even to add bubbles found in soda-type drinks. Carbon Engineering is a Canadian company that removes carbon dioxide from the atmosphere and processes it for use in enhanced oil recovery or even to create new synthetic fuels.

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Chinese esports player VSPN closes $60M Series B+ round to boost its international strategy

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eSports “total solutions provider” VSPN (Versus Programming Network) has closed a $60 million Series B+ funding round, joined by Prospect Avenue Capital (PAC), Guotai Junan International, and Nan Fung Group.

VSPN facilitates esports competitions in China, which is a massive industry and has expanded into related areas such as esports venues. It is the principal tournament organizer and broadcaster for a number of top competitions, partnering with more than 70% of China’s eSports tournaments.

The “B+” funding round comes only three months after the company raised around $100 million in a Series B funding round, led by Tencent Holdings.

This funding round will, among other things, be used to branch out VSPN’s overseas esports services.

Dino Ying, Founder, and CEO of VSPN said in a statement: “The esports industry is through its nascent phase and is entering a new era. In this coming year, we at VSPN look forward to showcasing diversified esports products and content… and we are counting the days until the pandemic is over.”

Ming Liao, the co-founder of PAC, commented: “As a one-of-its-kind company in the capital market, VSPN is renowned for its financial management; these credentials will be strong foundations for VSPN’s future development.”

Xuan Zhao, Head of Private Equity at Guotai Junan International said: “We at Guotai Junan International are very optimistic of VSPN’s sharp market insight as well as their team’s exceptional business model.”

Meng Gao, Managing Director at Nan Fung Group’s CEO’s Office said: “Nan Fung is honored to be a part of this round of investment for VSPN in strengthening their current business model and promoting the rapid development of emerging services and the esports streaming ecosystem.”

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