Robinhood CEO Vladimir Tenev described the recent Securities and Exchange Commission Wells notice as a “disappointing development” during a Q1 earnings call, as the firm posted a 224% increase in crypto trading volumes in the quarter to $36 billion.

Robinhood’s crypto-related services contributed to nearly 40% of its transaction-based revenue of $329 million, helping the firm record its second straight profitable quarter with a net income of $157 million.

But the strong quarter earnings results come in light of a Wells notice handed to the firm by the United States securities regulator last week, which targets Robinhood’s crypto listings and custodian operations.

Tenev said the news was a “disappointing development.”

Its chief financial officer, Jason Warnick, stressed the firm has adopted a conservative approach toward its coin listings and services and holds its crypto business to the same legal and compliance standards as its brokerage business.

“So it’s disappointing to see more regulation by enforcement here.”

The Robinhood executives however stressed that customer accounts aren't impacted by the development.

"We're going to defend the firm and continue to advocate for our customers," Tenev added.

Aside from the dilemma, Robinhood’s first quarter performance surpassed industry expectations, with its reported revenue of $618 million beating a $534.5 million estimate by investment research firm Zacks by 15.6%.

Robinhood shares rallied as high as 7.3% to $19.15 in after-hours trading but has since cooled off to $18.55, according to Google Finance.

Robinhood’s share price is now up 44.3% year-to-date.

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Robinhood reported custodying $26.2 billion worth of crypto for users, marking a 78% rise from last quarter.

The substantial increase could be partially attributed to a rise in market prices, with Bitcoin (BTC) rallying 65.1% to $69,700 over the quarter.

Robinhood launched its cryptocurrency unit in February, 2018, offering Bitcoin and Ethereum (ETH) trading in several states. It has since expanded its offering for Litecoin (LTC), Uniswap (UNI), Avalanche (AVAX), Chainlink (LINK) and several other tokens.

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