The beleaguered brokerage that attracted the attention of Gen Z investors, Robinhood HOOD, is facing further hardship.
The company's cryptocurrency unit was fined $30 million by New York's Department of Financial Services and is accused of violating anti-money laundering and cybersecurity laws.
Robinhood shares have dropped by 76.0% in the last year as the Gen Z investors it sought appear to have suffered significant losses when cryptocurrency prices plummeted while the stock market tanked due to concerns of high inflation and concerns of recession as the Federal Reserve raises interest rates.
Robinhood was trading at $9 at 11:30 a.m. ET, a drop from its 52-week high of $85.
The New York State Department of Financial Services announced on August 2 that it had issued its first enforcement in the crypto industry.
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It's claimed that inadequate staffing is to blame.
The government agency regulates financial services and goods, and alleges that Robinhood Crypto's anti-money laundering and cybersecurity program lacked adequate personnel and resources to address threats, and discovered "critical deficiencies in RHCs cybersecurity program."
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According to the New York State Department of Financial Services, Robinhoods' crypto division did not convert from a manual transaction monitoring system to a one that has more resources for its user size and transaction volume.
Robinhood Crypto allegedly violated the law when it certified compliance with the department, and it breached consumer protection requirements when it failed to establish and maintain a phone number on its website dedicated to consumer complaints.
Robinhood Crypto must also pay the fine and conduct a review of its compliance with the applicable regulations.
Robinhood Crypto omitted to invest the necessary time and energy to establish and maintain a culture of compliance as its business expanded, a failure that resulted in significant violations of the Department's anti-money laundering and cybersecurity regulations, according to NYDFS Superintendent Adrienne Harris.
Other fines have been paid.
Robinhood was fined $135 million by regulators in the last two years. In 2020, the brokerage paid $65 million when the SEC said it misled customers and paid a $70 million fine in 2021 when the industry's regulator, the Financial Industry Regulatory Authority, said it misled customers and was responsible for outages.
According to Robinhood's associate general counsel for litigation and regulatory enforcement, the company has made significant progress in developing its legal, compliance, and cybersecurity programs.
We're pleased that the principle agreement reached last year and previously disclosed in our public records is now final.
Robinhood has strived to revolutionize investing and attract a new generation of investors, but has faced a slowdown in trading volumes, both in the cryptocurrency market and the wider financial markets.