Robinhood crypto arm to pay $30M in penalty amid massive layoffs

YEREVAN (CoinChapter.com) – Robinhood Crypto, LLC will pay a $30 million penalty to the New York State for “significant failures” in bank secrecy act, concerning anti-money laundering and cybersecurity, according to the New York State Department of Financial Services (NYDFS).

DFS Investigation Finds Robinhood Crypto failed to maintain effective and compliant BSA/AML and cybersecurity programs, violated critical consumer and reporting requirements, and improperly certified compliance.

announced the agency.

Robinhood’s $30M penalty

In addition to the penalty, the Department will require Robinhood to retain an independent consultant as part of the settlement.

Notably, the consultant will comprehensively evaluate the firm’s compliance with the Department’s regulations. It will also evaluate the “remediation efforts concerning the identified deficiencies and violations.”

Superintendent Adrienne Harris noted Robinhood’s lack of compliance as the main reason for the penalty. It was 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.”

mentioned the Superintendent.

Not the first fine

The fine is not the first monetary penalty for Robinhood.

In 2020, the company paid $65 million to settle a probe from the U.S. Securities and Exchange Commission (SEC) over “misleading customers.” The same violation occurred in 2021, and the Financial Industry Regulatory Authority (FINRA) fined Robinhood $70 million.

Cheryl Crumpton, associate general counsel of litigation and regulatory enforcement at Robinhood, noted that the company made “significant progress” in building its legal, compliance, and cybersecurity programs.

We are pleased the settlement in principle reached last year and previously disclosed in our public filings is now final.

added Crumpton.

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The multi-million fines were coupled with layoffs brought on by the extended market drawdown.

Heavy layoffs after disappointing quarter report

Robinhood reported slashing 23% of its staff after posting a 44% revenue decline year-over-year. The company also reported a slumping in trading activity, sending its shares down more than 3% in extended trading since the announcement on Aug. 2.

As a result, it committed to a “reorganization,” said the company CEO Vladimir Tenev, with a 9% layoff in April, including “duplicate roles and job functions.” However, Tenev commented that the cuts did not go far enough.

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The company staffed its operations, assuming that Covid-induced heightened retail engagement would continue into 2022. But “deterioration of the macro environment” persisted since, causing Robinhood to take drastic measures.

As CEO, I approved and took responsibility for our ambitious staffing trajectory – this is on me.

added Tenev.