Robinhood’s cryptocurrency division has been fined $30 million by the New York Department of Financial Services over alleged anti-money laundering and cybersecurity violations (via The Wall Street Journal). This marks the state’s first enforcement action related to cryptocurrency.
The settlement resolves the investigation opened by the NYDFS last March, which Robinhood disclosed in a filing with the Securities and Exchange Commission before the company went public. While Robinhood initially estimated that the NYDFS would fine the company up to $15 million, it later amended its filing to reflect an estimated $30 million fee.
According to the NYDFS, Robinhood Crypto’s cybersecurity program had “critical failures” that “did not fully address” the company’s operational risks. The NYDFS also alleges that Robinhood’s crypto arm had “significant deficiencies” in its anti-money laundering compliance program and that it violated consumer protection laws by not having a phone number on its website dedicated to fielding customer complaints.
“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,” Adrienne Harris, the superintendent of NYDFS, said in a statement.
“We are pleased the settlement in principle reached last year and previously disclosed in our public filings is now final,” said Cheryl Crumpton, Robinhood’s associate general counsel of litigation and regulatory enforcement. “We have made significant progress building industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers.”
In 2020, the SEC charged Robinhood $65 million for allegedly misleading customers about how it makes money. Last June, the Financial Industry Regulatory Authority (FINRA) fined Robinhood nearly $70 million to settle claims over its failure to protect customers on the trading platform. Around the same time, the US Department of Justice seized Robinhood CEO Vlad Tenev’s phone during its investigation into how Robinhood handled the GameStop stock frenzy last year.