Robinhood has radically reshaped the brokerage industry with a free and easy to use app that has pulled new retail investors into the market en masse, but as a private company its own finances have been closely guarded.

That changed on Thursday with the publication of the prospectus for its initial public offering, which provided the first comprehensive look at the underpinnings of its business, earnings and potential risks for investors.

Robinhood has come under fire for what one regulator called the “gamification” of investing — the use of rewards, bonuses, push notifications and other prompts on its easy-to-use app, which encourage frequent trading from customers. Critics say it targets vulnerable retail investors by making stock trading into a gambling-like game.

But it also appears to be effective. The prospectus shows that investors on the platform are trading larger amounts, and more often, than ever. Robinhood’s revenue per user increased 65 per cent in the first three months of 2021, up from almost $83 a customer with a funded account in the same period in 2020, to $137.

Robinhood makes more money the more its customers trade. The number of funded accounts on the platform rose from 5.1m at the end of 2019 to 12.5m at the end of last year, and surged again to 18m at the end of March.

The most lucrative cohort of investors listed in the prospectus are those who joined in 2020: they deposited 45 per cent of the money on the platform.

Robinhood’s core business relies on a controversial practice known as payment for order flow, or PFOF. The brokerage sells customer trades to market makers, such as Citadel Securities, who in return promise to execute the trade at, or at better than, current market prices.

In 2020 Robinhood made almost $720m selling customer trades, accounting for 75 per cent of its revenue. That portion grew to 81 per cent in the first quarter this year.

Payment for order flow helps brokers offer commission-free trading to customers, but the practice is banned in both the UK and Canada and the US Securities and Exchange Commission is reviewing it. SEC chair Gary Gensler has raised concerns that PFOF does not result in best execution for customers.

Any regulatory change could seriously damage Robinhood’s business model, the prospectus acknowledges. While other brokerages such as TD Ameritrade and Charles Schwab also sell user trades, it makes up less than 10 per cent of their revenues, according to BrokerChooser.

Cryptocurrency trading proved lucrative for Robinhood during the recent boom, commanding a growing slice of business.

The company said crypto leapt to account for 17 per cent of revenues in the first quarter, up from 4 per cent just in the quarter before. Customers traded about $88bn in cryptocurrencies through Robinhood in the first three months of the year.

As a result, assets under custody in cryptocurrencies at the end of the quarter were more than 24 times greater than a year earlier, at $11.6bn.

Robinhood warned that a substantial portion of the increase in activity was in dogecoin, a joke currency championed by Elon Musk. Dogecoin trading accounted for 34 per cent of cryptocurrencies revenues in the first quarter, Robinhood said.

Robinhood has repeatedly run afoul of regulators for what one likened to Silicon Valley’s “move fast and break things” approach to business.

The prospectus named seven US state and federal bodies investigating the company and revealed previously unknown inquiries. These included one by the California attorney-general’s office and a lawsuit from New York state’s Department of Financial Services over anti-money laundering and cyber security issues which Robinhood said would probably result in a financial penalty of at least $10m.

On Wednesday the Financial Industry Regulatory Authority levied on Robinhood its highest-ever fine — $70m — for causing “widespread and significant harm” to customers over a period of more than five years. In the prospectus, Robinhood said the Wall Street regulator’s investigation was still continuing and it anticipated more financial penalties.

As well as Finra, Robinhood is also under investigation by the SEC and state regulators over platform outages, communication with customers and errors in displaying user account balances.

Meanwhile, almost 50 class-action lawsuits and three individual customer actions have been filed against Robinhood for suddenly imposing restrictions on the trading of “meme stocks” including GameStop at the height of an investor frenzy in January.

The GameStop saga put the spotlight on Robinhood’s financial position, since it was forced to impose the trading curbs when it couldn’t put up enough of its own money to back customer trades.

In order to restore trading, the company scrambled to raise $3.5bn in convertible debt in a matter of days.

The company had amassed $4.8bn in cash and cash equivalents on its balance sheet, as of the end of March, the prospectus shows. In April it also secured a $2.2bn revolving line of credit that can be used to finance margin loans and other trading activities.

The cash cushion and credit facility could help Robinhood meet deposit requirements with clearinghouses in the event of another trading spike.