Robinhood’s crypto arm has been fined $30 million by the New York State Department of Financial Services .
According to a Wall Street Journal report on Tuesday, the New York State Department of Financial Services has fined Robinhood over allegations that it violated anti-money laundering and cybersecurity regulations. This is the first time the NYDFS has stepped in to sanction a crypto entity.
According to the WSJ article, the NYDFS said Robinhood failed to maintain the standards required to remain compliant with anti-money laundering and cybersecurity programs given the size of its business. In addition to the $30 million penalty, the company will now have to hire an independent consultant to ensure it is in compliance with NYDFS regulatory requirements.
The NYDFS reportedly found deficiencies in Robinhood’s operations when it conducted a supervisory review and subsequent enforcement investigation. According to the report, the regulator found poor management of the company and a lack of regard for compliance practices, including misallocation of resources to compliance programs and failure to create a culture of compliance. The regulator also said Robinhood failed to meet its cybersecurity and virtual currency guidelines or address its operational risks.
Robinhood disclosed the investigation in an SEC filing in 2021, when it was experiencing rapid growth amid a boom in demand for stocks and crypto assets. NYDFS reportedly said the company’s problems became more significant as it grew.
Robinhood last raised $3.4 billion in early 2021 from numerous venture capital players like Sequoia and Andreessen Horowitz. It became more involved in crypto-currencies as the space grew, eventually launching a dedicated digital asset arm called Robinhood Crypto. However, it suffered in 2022 from a downturn that hit blockchain and technology-focused companies. Its revenue dropped nearly 50 percent in the first quarter of the year, and it has since joined the growing list of tech companies announcing layoffs.