Robinhood’s cryptocurrency division was fined $30 million by the New York Department of Financial Services for alleged money laundering and cybersecurity violations (via The Wall Street Journal). This marks the first state enforcement action related to cryptocurrency.
The settlement resolves an investigation launched by the NYDFS last March, which Robinhood disclosed in a filing with the Securities and Exchange Commission before the company went public. Although Robinhood initially estimated that the NYDFS would fine the company up to $15 million, it later changed its statement to reflect an estimated fee of $30 million.
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 alleged 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 for complaints to customers.
“As its business grew, Robinhood Crypto failed to invest the necessary resources and attention to develop and maintain a culture of compliance – a failure that resulted in significant breaches of the Department’s Anti-Money Laundering and Cybersecurity regulations,” Adrienne Harris, NYDFS chief, said in a statement.
“We are pleased that the agreement in principle reached last year and previously disclosed in our public filings is now final,” said Cheryl Crumpton, Robinhood’s Associate General Counsel for Litigation and Regulatory Enforcement. “We have made significant progress in building industry-leading legal, compliance and cybersecurity programs, and we will continue to prioritize this work to best serve our customers.”
In 2020, the SEC fined Robinhood $65 million for allegedly misleading customers about how it made money. Last June, the Financial Industry Regulatory Authority (FINRA) fined Robinhood nearly $70 million to settle claims that it failed to protect the trading platform’s customers. Around the same time, the US Department of Justice seized the phone of Robinhood CEO Vlad Tenev during its investigation into how Robinhood handled the GameStop stock frenzy last year.