Robinhood set themselves up The application of “financial democracy” Accused of misleading and taking over retail investors would have to pay another $30 million to appease regulators. This brings the company’s total regulatory penalty and settlement mark to well over $100 million.
in deposit On Tuesday, the New York State Department of Financial Services ordered Robinhood’s crypto division to pay a heavy fine and accused the company of engaging in “significant anti-money laundering, cybersecurity and consumer protection violations.” The financial blow represents the latest in a series of regulatory headwinds for the company in recent years and first Cryptocurrency application for New York regulator.
While Robinhood is best known for its small stock trading services that are attractive to regular investors, the company’s crypto division is too Exchange runs That allows users to buy and sell cryptocurrencies. NYDFS investigators, who opened their preliminary investigation last March, Claim Robinhood has failed to maintain effective and compliant cybersecurity software, and has improperly violated approved reporting and compliance requirements. The agency found “serious failures” in the company’s cybersecurity program, which it claims has not fully addressed “operational risks”. In addition to the penalty, Robinhood will have to hire an independent consultant who will conduct an assessment to determine the company’s compliance going forward.
“As its business grows, Robinhood Crypto has failed to invest the appropriate resources and attention to develop and maintain a culture of compliance — a failure that has led to serious violations of AML and Cybersecurity Department rules,” NYDFS Director of Financial Services Adrienne Harris said in a statement.
In response to Gizmodo’s request for comment, Robinhood’s Assistant General Counsel for Litigation and Regulatory Enforcement, Sheryl Crompton, said the company was “delighted” to make the settlement final.
“We have made significant progress in building industry-leading programs in legal, compliance and cybersecurity, and we will continue to prioritize this work to provide the best service to our customers,” Crumpton said. “We remain proud to offer an accessible and affordable platform for buying and selling cryptocurrencies, and we are excited to continue to grow our business responsibly through new products and services that our customers want.”
Unfortunately, the NYDFS The fine was just the start of Robinhood’s troubles on Tuesday. Within hours of the good news, Robinhood CEO and Founder Vlad Tenev posted a file Blog post announcing that the company will cut about 23% of its workforce as part of the company’s broader reorganization.” Addressing his newly unemployed employees as “Robinhoodies,” Tenev said the dramatic cuts would affect workers across the company, as operations and marketing teams bear the burden. Program management the brunt of the burden.
The layoffs come about three months after Robinhood announce It will move to fire 9% of its employees after a period of “excessive growth” fueled by the pandemic. Now, Tenev says, these cuts “didn’t go far enough.” The CEO said that rising inflation, combined with the collapsing cryptocurrency market, has significantly reduced the trading activity of its clients.
“In the past year, we have hired many of our operations functions with the assumption that the increased retail engagement we have seen with the stock and crypto markets in the COVID era will continue into 2022,” Tenev said. “In this new environment, we are working with more employees than appropriate. As CEO, I have agreed and taken responsibility for our ambitious hiring path – and that is on me.”
Robinhood was founded nearly a decade ago in 2013 but only entered the collective imagination of most people in the past year for its role as a major tool for individual investors to amplify. GamestopAnd the AMCand other so-called stock meme. While some users made millions during the trading frenzy, many lost their money. Robinhood pissed off some of its users when they interfered stop trading Some stocks, which prevented some users from selling until prices fell. The following year, the company faced numerous complaints and regulatory investigations. Last June, the Financial Industry Regulatory Authority (FINRA) hit Robinhood with $57 million fine, the biggest punishment the agency has ever issued. Not long after, Robinhood agreed By paying the Securities and Exchange Commission $65 million to settle the fees, it misleads clients with claims it is a no-commission way to trade stocks.
Individual investors allegedly burned by Robinhood are starting to see some payouts, too. Earlier this year, a FINRA arbitrator ruled in favor of a 27-year-old truck driver named Jose Batista, who claimed he lost money after Robinhood restricted trading. FINRA Command Robinhood to pay the man $29,500 in compensation. Batista is far from alone. The Federal Trade Commission said it received 3,081 complaints related to Robinhood between 2020 and mid-2021 to me A Freedom of Information Act request filed by Gizmodo earlier this year.
“I understand the market can be volatile, but this was Robinhood’s refusal to honor the trades of people who bought the shares legitimately,” said one user who claimed they were forced to sell at a loss due to Robinhood’s interference in the complaint. “Since Robinhood has not provided any response to customer service emails, tweets, or anything related to this issue, I must assume that Robinhood can do so in the future for any other shares they don’t want to pay.”
Updated at 5:05 PM ET with additional news on workforce cuts.