Robinhood crypto has been fined $30 million by New York State Department of Financial Services (NYDFS) for their shady business dealings. Robinhood Markets’ cryptocurrency division has been accused of skirting around anti-money laundering and cybersecurity laws.
The current fine raises Robinhood markets’ total penalty well over $100 million. It is the first time that the NYDFS has penalized a crypto firm. As part of the agreement, Robinhood crypto is also required to hire an independent consultant who will evaluate the company’s compliance with NYDFS’s rules and suggest remedial efforts.
Not willing to excuse any wrongdoings, Superintendent of Financial Services Adrienne A Harris stated, “As its business grew, Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance—a failure that resulted in significant violations of the Department’s anti-money laundering and cybersecurity regulations.”
Is Robinhood Safe?
Well, if you ask NYFS regulators, Robinhood crypto has failed to live up to the standards set up by the agency. In a statement released on August 2, Harris revealed that the company did not adhere to the bank secrecy act and anti-money laundering obligations. She stated, “All virtual currency companies licensed in New York State are subject to the same anti-money laundering, consumer protection, and cybersecurity regulations as traditional financial services companies. DFS will continue to investigate and take action when any licensee violates the law or the Department’s regulations, which are critical to protecting consumers and ensuring the safety and soundness of the institutions.”
During an investigation of Robinhood markets, the department found that Robinhood markets did not invest in the proper resources to develop or maintain cybersecurity. It also did not provide nor maintain a distinct phone line on its website to address customer complaints.
Addressing the charges, Cheryl Crumpton, associate general counsel of litigation and regulatory enforcement at Robinhood told Fast Company that the company has made significant progress in building “industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers.” She reiterated that Robinhood crypto will grow its business in a responsible manner so that customers have a safe place to buy and sell crypto, as the company develops new products.
Robinhood’s Regulatory Escapades
Meanwhile, this is not the first time that Robinhood markets has been penalized by a regulatory body. Last year, the firm was ordered to pay $70 million for misleading customers and for providing false information.
Earlier, in 2020, the US Securities and Exchange Commission (SEC) pulled up the company for deceiving customers about how it makes money and for failing to live up to its promises. The charges resulted in Robinhood markets agreeing to pay $65 million although the company did not admit to or deny the SEC’s findings.
Robinhood’s monthly active user count dropped 25% in the first quarter from last year’s quarterly peak, while its revenue dropped 47%. The company has shifted its focus from rapid growth to cost-cutting, laying off 9% of its staff earlier this year.
Since going public in July 2021, Robinhood’s stock price has plummeted by over 70%.
Furthermore, within hours of the announcement regarding the $30 million fine, Robinhood CEO and Founder Vlad Tenev revealed in a blog post that the company will be trimming its workforce by 23%. He acknowledged that workers across the company will be impacted by the job cuts with operations, marketing, and program management teams seeing a sizable reduction.
A few months earlier, Robinhood markets had commented that they will downsize by 9% as they had overhired during the pandemic-era. Tenev had admitted that the firm is working with more staffing than appropriate and that the ambitious staffing drive taken by the company was his fault.
