- The retail investing platform was assessed a $30 million fine by the New York State Department of Financial Services for allegedly violating cybersecurity and anti-money laundering laws.
- Robinhood Crypto LLC was fined for allegedly failing to maintain and authenticate aligned cybersecurity and anti-money-laundering initiatives.
The New York State Department of Financial Services (NYDFS) fined the Robinhood (HOOD) cryptocurrency trading division $30 million for possible violations of cybersecurity and anti-money-laundering laws as per The Wall Street Journal.
The financial watchdog for New York State stated on Tuesday that Robinhood Crypto LLC had neglected to keep and certify compliant cybersecurity and anti-money-laundering programs. The consent order also stipulates that Robinhood hire an impartial consultant to assess its compliance with NYDFS regulations and its corrective actions.
Additionally, the NYDFS claimed that an oversight assessment and a successive enforcement investigation into Robinhood found substantial failures and inadequacies
The regulator claimed that the failures were due to vulnerabilities in the company’s management and supervision of its compliance programs. These include failing to establish and uphold a culture of compliance and failing to provide enough funding for the programs, especially as the business expanded quickly and the problems multiplied.
The fine was anticipated by Robinhood Crypto, which had previously stated that it anticipates being penalized by the New York regulator.
The investigation and settlement with the NYDFS were first made public by Robinhood a year ago in the documents submitted to the Securities and Exchange Commission, according to the company’s most recent quarterly report, which stated that it had approximately 15.9 million monthly active users as of the end of March.
The investigation also discovered that Robinhood had violated consumer protection laws by failing to post a specific phone number for customer complaints on its website. Now, Robinhood must continue to hire an impartial consultant to assess both its compliance with the regulations of the state regulator and its corrective actions. In pre-market trading, shares of Robinhood were also down more than 1% at $8.92.
The agreement with Robinhood was the first punitive action by NYDFS—which, given New York’s status as a financial center, has a significant influence on financial regulation and enforcement—against the cryptocurrency sector.
Bankman-Fried recently purchased a 7.6 percent stake in Robinhood for $648 million, according to a Securities and Exchange Commission filing. This type of filling is used when someone purchases more than 5 percent of a company but could also indicate a potential takeover. The Bankman-Fried bought the Robinhood stock because they thought it “represents an attractive investment.”