Robinhood (HOOD) crypto division fined $30 million by NY regulator

As stock trading app company Robinhood has delved into cryptocurrency trade on its platform, it seems the company has tripped over a few regulations along the way. The company is set to take a $30 million USD fine specifically targeted at its crypto division, and the reasons cited are that it failed to adhere to rules related to both anti-money laundering and cybersecurity.

Robinhood’s crypto division fine was revealed in a report by CNBC, which suggested the company could face penalties amounting to around $30 million. The judgement comes from regulators on behalf of the New York State Department of Financial Services. The New York regulators claim that Robinhood’s cryptocurrency division failed to maintain proper and regulation-compliant cybersecurity programs, as well as failing to staff effectively to minimize risks associated with money laundering and further security issues. The decision also demands that Robinhood Crypto will be forced to keep an independent consultant on hand that will periodically evaluate the company’s compliance with regulations in relation to its alleged failures.

Despite a $30 million USD fine out of New York, Robinhood's (HOOD) stock appears to be up on the day, starting at $8.81 per share on market open.
Source: Google

“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. 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. DFS will continue to investigate and take action when any licensee violates the law or the Department’s regulations, which are critical to protecting consumers and ensuring the safety and soundness of the institutions.500). In addition to the penalty, RHC will also be required, as part of the settlement, to retain an independent consultant that will perform a comprehensive evaluation of RHC’s compliance with the Department’s Regulations and RHC’s remediation efforts with respect to the identified deficiencies and violations.” ~ New York State Department of Financial Services Superintendent Adrienne A. Harris

Many will remember Robinhood from its notorious decision to block trade on GameStop (GME) stock when it took off in early 2021, but the company has had an even rockier road since. Shares of the company began publicly trading in July 2021 and its stock value has rarely found successful footing amid other issues such as user data security breaches and other fines for breach of regulation and harm to customers.

Robinhood isn’t down and out, but it looks like the company continues to face significant issues with the latest fine. As the platform continues to try to expand further into both the stock trading and crypto space, it will remain to be seen if it can right its ship in a significant way.