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The New York Department of Financial Services has fined Robinhood Crypto $30 million for multiple regulatory violations.
The department concluded after an investigation that the company had failed to maintain proper cybersecurity measures or satisfy anti-money laundering obligations. Robinhood Crypto was found in violation of the department’s regulations for virtual currency, money transmitters, transaction monitoring, and cybersecurity.
According to a statement from the regulator, aside from just paying the fine, Robinhood Crypto will be required to hire an independent consultant to evaluate its compliance with state regulations. The company also was dinged for not providing a dedicated phone number on its website that enabled customers to submit complaints.
“As its business grew, Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance,” said Adrienne Harris, superintendent of New York’s Department of Financial Services.
The department alleges that Robinhood Crypto’s anti-money laundering program was “inadequately staffed”—using a manual system for monitoring transactions even as its user base grew—and had critical failures in its cybersecurity program. Regulators said the violations were due to a lack of management and oversight, exhibiting a “failure to foster and maintain an adequate culture of compliance.”
Despite the deficiencies, Robinhood had applied for a license with the department, saying it was in full compliance with anti-money laundering and cybersecurity regulations in 2019. The regulator found this to be in violation of the law.
“All virtual currency companies licensed in New York State are subject to the same anti-money laundering, consumer protection, and cybersecurity regulations as traditional financial services companies,” Harris said. “DFS will continue to investigate and take action when any licensee violates the law.”
Robinhood’s cryptocurrency trading unit has been a growing focus for the company as the service adds new coins. In April, it reported $54 million in revenue for the first quarter of this year, up from the previous one ($48 million) but down compared to a year before ($88 million).
However, Robinhood recently shifted focus from growth to better managing costs amid recent market turbulence, one of the many factors contributing to reduced demand for financial services from retail investors. Days before its first earnings conference of the year, it slashed its workforce by 9%.
A Robinhood representative said the company was glad its settlement with the New York regulators has been finalized, and that the company will strive to prioritize regulatory compliance.
“We have made significant progress building industry-leading legal, compliance, and cybersecurity programs,” Cheryl Crumpton, Robinhood’s associate general counsel of litigation and regulatory enforcement, said in an emailed statement. “We remain proud to offer a more accessible, lower-cost platform to buy and sell crypto.”