California-based crypto trading platform Robinhood has been fined US$30 million by a New York regulator for failing in its anti-money-laundering obligations.
To make matters worse, the company has also been forced to lay off 25 percent of its staff after performance failed to match expectations.
Additional Cybersecurity and Consumer Protection Violations
The New York State Department of Financial Services (NYDFS) has issued details of the penalties. Additional to its anti-money-laundering failure, Robinhood is to be penalised for cybersecurity and consumer protection violations.
The platform’s cybersecurity program was found to lack sufficient resources to address risk. Its crypto division had also failed to transition from a manual transaction monitoring system to one more adequate for its user size and transaction volume, in a timely manner.
NYDFS Superintendent Adrienne Harris has spoken publicly about Robinhood’s shortcomings:
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.
Adrienne Harris, NYDFS Superintendent
Unfortunately for Robinhood, the bad news does not stop there. On August 2, the company released a message from Vlad Tenev, its CEO and co-founder, announcing that the company would be forced to cut almost a quarter of its staff.
Ironically, considering Robinhood’s cybersecurity program was found to be inadequately staffed, overhiring in 2021 in anticipation of growing retail engagement with stock and crypto markets was blamed for the layoffs. Performance failed to match expectations, and Robinhood is bracing for approximately US$30-40 million in cash restructuring charges from employee benefits costs and severance.
One Ordinary Year Follows Another
Last year saw Robinhood also make the news multiple times for all the wrong reasons. In July, the crypto trading app was fined US$70 million for misleading its customers.
Then in October, Robinhood experienced a 78 percent decline in its Q3 crypto revenue. User growth in investment apps had skyrocketed as retail investors piled into stocks and crypto in the wake of the March 2020 Covid-19 financial meltdown. As a result, memecoins were receiving a lot of attention and Robinhood’s exposure to DOGE was blamed for the drop.