Robinhood HOOD, the shattered brokerage that attracted the attention of Gen Z investors, is facing even greater hardship.
The company's cryptocurrency unit was fined $30 million by New York's Department of Financial Services and was accused of violating anti-money laundering and cybersecurity laws.
Robinhood's stock market has fallen by 76.0% in the last year as the Gen Z investors it sought appeared to have suffered significant losses when cryptocurrency prices plummeted while the stock market has tanked due to concerns of high inflation and recession as the Federal Reserve raises interest rates.
Robinhood was trading at $9 at 11:30 a.m. ET, a decrease from its 52-week high of $85.
The New York State Department of Financial Services announced on Aug. 2 that it had issued its first enforcement in the crypto sector.
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There is allegations of insufficient staffing.
The government branch regulates financial services and products and alleges that Robinhood Crypto's anti-money laundering and cybersecurity program lacks adequate personnel and resources to deal with 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 go from a manual transaction monitoring system to one that has more resources for its user size and transaction volume.
Robinhood Crypto allegedly acted in contravention of the state department when it certified compliance with the department and breached consumer protection regulations when it failed to establish and maintain a telephone number on its website dedicated for consumer complaints.
Robinhood Crypto must also pay the fine and hire an independent consultant to assess its compliance with the applicable laws.
Robinhood Crypto omitted to invest the appropriate time and effort to develop and maintain a culture of compliance as its business expanded, a failure that resulted in substantial violations of the Department's anti-money laundering and cybersecurity policies, according to NYDFS Superintendent Adrienne Harris.
Other Fines Paid
Robinhood has been subjected to regulatory scrutiny over the previous two years, and has paid $135 million in fines. In 2020, the brokerage paid $65 million when the SEC ruled 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 building its legal, compliance and cybersecurity programs.
We are pleased that the principle agreement reached last year, which was previously disclosed in our public records, is now final.
Robinhood has strived to revolutionize investing and attract a new generation of investors, but has encountered a slowdown in trading volumes, both in the cryptocurrency market and the wider financial markets.