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The New York State Department of Financial Services has reportedly issued Robinhood Crypto with a $30 million fine. It’s the first time the financial regulator has fined a crypto company.
Robinhood Crypto Under Fire
Robinhood’s crypto arm has been served a $30 million slap on the wrist, The Wall Street Journal has reported.
According to a Tuesday report, the New York State Department of Financial Services (NYDFS) has fined Robinhood Crypto on allegations it broke anti-money-laundering and cybersecurity regulations. It’s the first time NYDFS has stepped in to reprimand a crypto entity.
According to the report, NYDFS said that Robinhood Crypto failed to maintain the standards required to stay compliant with anti-money laundering and cybersecurity programs given the size of its company. In addition to the $30 million penalty, the firm will now have to hire an independent consultant to ensure it meets the NYDFS’ regulatory requirements.
NYDFS reportedly found failings in Robinhood Crypto’s operation when it conducted a supervisory exam and ensuing enforcement investigation. According to the report, the regulator pointed to mismanagement in the company and a lack of regard for compliance practices, including a misallocation of resources to compliance programs and failure to create a culture of compliance. The regulator also said Robinhood Crypto 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 that the company’s issues became more of a problem as it scaled.
Robinhood last raised $3.4 billion in early 2021 from a host of major venture players like Sequoia and Andreessen Horowitz, and made its public debut on Nasdaq in July 2021. It became more involved in crypto as the space boomed, eventually launching an arm dedicated to digital assets called Robinhood Crypto. However, it has suffered in 2022 amid a months-long downturn that’s hit blockchain and technology-focused companies alike. Its revenue plummeted by almost 50% in the first quarter of the year, and it’s since joined a growing list of tech firms to announce company layoffs.
Robinhood Crypto has not yet publicly commented on the NYDFS fine.
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