Robinhood Crypto Unit risks $30 million in fines
The New York State Department of Financial Services (NYDFS) has fined the cryptocurrency trading unit of online brokerage Robinhood $30 million for alleged violations of anti-money laundering (AML) and cybersecurity regulations, The Wall Street Journal (WSJ) reported on Tuesday (Aug. 2).
The New York State financial regulator’s first crypto enforcement action said Robinhood Crypto “failed to maintain and certify compliant anti-money laundering and cybersecurity programs,” according to the report. Robinhood must also retain an independent consultant to assess compliance.
Robinhood Crypto was found to have committed “significant errors” based on the NYDFS’ supervisory examination and through a subsequent enforcement investigation, the report said, resulting in “deficiencies in the company’s management and oversight of its compliance programs,” including failure to maintain a culture of compliance or allocate resources to the programs, especially as the company grew rapidly.
In its latest quarterly report, Robinhood said it had about 15.9 million monthly active users at the end of March. The company disclosed the NYDFS investigation and settlement last year in a Securities and Exchange Commission (SEC) filing, according to the report.
The NYDFS investigation found that Robinhood’s Bank Secrecy Act and AML compliance program was understaffed and did not move quickly enough away from the manual transaction monitoring system. The company also did not have a dedicated phone number on the website for customer complaints, because they do not comply with consumer protection requirements, the report said.
“We have made significant progress in building industry-leading legal, compliance and cybersecurity programs, and will continue to prioritize this effort to best serve our clients,” Robinhood Associate General Counsel of Litigation and Regulatory Enforcement Cheryl Crumpton said in a statement Tuesday.
In June, reports surfaced that cryptocurrency exchange FTX could acquire Robinhood as the company’s market cap continued to fall.
Read more: Robinhood jumps for news of possible FTX purchase
The company saw its stock price drop more than 80% in mid-June, with losses exceeding $3 billion since Robinhood went public in July 2021.
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