Robinhood’s crypto division fined $30 million by New York regulator

People wait in line for T-shirts at a pop-up online brokerage Robinhood booth along Wall Street after the company announced an initial public offering earlier today on July 29, 2021 in New York City.

Spencer Platt | Getty Images

The New York State Department of Financial Services announced Tuesday that it has issued a $30 million fine against Robinhood’s crypto division.

The NYDFS, the government branch responsible for regulating financial services and products, alleged that Robinhood Crypto’s anti-money laundering and cybersecurity program was not sufficiently staffed and resourced to address the risks. It also alleged that Robinhood’s crypto division failed to make the timely transition from a manual transaction monitoring system to one that was more appropriate for user and transaction volume.

The $30 million penalty is the first NYDFS crypto sector implementation. Robinhood said last year it expected to pay a $30 million settlement to NYDFS after a 2020 investigation focused on anti-money laundering and cybersecurity issues.

The regulator claimed that Robinhood Crypto broke the law when, despite the alleged problems, it certified compliance with the oath. Robinhood Crypto is also alleged to have violated consumer protection requirements when it failed to maintain a unique and dedicated phone number on its consumer complaints website.

Robinhood Crypto will have to hire an independent advisor to assess its compliance with relevant regulations.

“As its business has grown, 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 significant violations of AML and Cybersecurity Department rules,” said NYDFS Superintendent, Adrian Harris..

The fine is the latest in a series of financial penalties that regulators have imposed on Robinhood. In 2020, Robinhood paid $65 million to settle a Securities and Exchange Commission investigation into misleading clients. In 2021, the Financial Industry Regulatory Authority (FINRA) fined Robinhood $70 million for outages and misleading clients.

“We are pleased that the settlement reached last year and previously disclosed in our public filings is final,” said Sheryl Crompton, Assistant General Counsel for Litigation and Regulatory Enforcement at Robinhood.

Crumpton added that the company had made “significant progress” in building its legal, compliance and cybersecurity programs.

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