Robinhood’s crypto division fined $30 million by New York regulator
People wait in line for t-shirts at a pop-up kiosk for the online brokerage Robinhood along Wall Street after the company went public with an IPO earlier in the day on July 29, 2021 in New York City.
Spencer Platt | Getty Images
The New York State Department of Financial Services announced on Tuesday it has issued a $30 million penalty against Robinhood’s crypto division.
NYDFS, the government branch that’s responsible for regulating financial services and products, alleged that Robinhood Crypto’s anti-money laundering and cybersecurity program was inadequately staffed and did not have sufficient resources to address risks. It also alleged Robinhood’s crypto division failed to timely transition from a manual transaction monitoring system to one more adequate for its user size and transaction volume.
The $30 million penalty is NYDFS’s first crypto-sector enforcement. Robinhood said last year that it was expecting to pay a $30 million settlement to NYDFS after a 2020 investigation focusing on anti-money laundering and cybersecurity-related issues.
The regulator claimed Robinhood Crypto violated the law when, despite the alleged issues, it certified compliance with the department. Robinhood Crypto also allegedly breached consumer protection requirements when it failed to maintain a distinct and dedicated phone number on its website for consumer complaints.
Robinhood Crypto will have to retain an independent consultant to evaluate its compliance with related regulations.
“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,” said NYDFS Superintendent Adrienne Harris.
The fine is the latest in a slew of monetary penalties that regulators imposed on Robinhood. In 2020, Robinhood paid $65 million to settle an SEC probe over misleading customers. In 2021, the Financial Industry Regulatory Authority (FINRA) fined Robinhood $70 million for outages and misleading customers.
“We are pleased the settlement in principle reached last year and previously disclosed in our public filings is now final,” said Cheryl Crumpton, associate general counsel of litigation and regulatory enforcement at Robinhood.
The company has made “significant progress” in building its legal, compliance and cybersecurity programs, Crumpton added.