The New York State Department of Financial Services (NYDFS) fined the crypto trading unit of Robinhood (HOOD) $30 million for alleged violations of anti-money laundering and cybersecurity regulations. The Wall Street Journal first reported on the fine on Tuesday.
“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,” said NYDFS Superintendent Adrienne A. Harris in a statement.
In addition to the fine, Robinhood will also be required to retain an independent consultant to evaluate its compliance with NYDFS regulations.
According to the Wall Street Journal, the fine against Robinhood is the NYDFS's first crypto enforcement action.
In a statement to CoinDesk, Robinhood's associate general counsel of litigation and regulatory enforcement, Cheryl Crumpton, wrote that "we are pleased the settlement in principle reached last year and previously disclosed in our public filings is now final. We have made significant progress building industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers."
According to Robinhood's first-quarter results, crypto constituted about 25% of the company's transaction-based revenue.
Robinhood Crypto said last year that it expected to be fined $30 million by the New York regulator. A 2020 investigation “focused primarily on anti-money laundering and cybersecurity-related issues” and found the company to be in violation of numerous regulatory requirements, the firm said at the time.
In 2021, the trading firm was fined $70 million by the Financial Industry Regulatory Authority (FINRA), the largest fine ever issued by FINRA, for failing to protect customers.
Shares of Robinhood were down just over 1% in early trading Tuesday at $8.94.
UPDATE (Aug 2, 2022, 13:22 UTC): Adds background information and stock move.
UPDATE (Aug 2, 2022, 14:03 UTC): Removes "Report" from headline and adds statement from NYDFS and response from Robinhood.
UPDATE (Aug 2, 2022, 15:16 UTC): Added information about size of Robinhood's crypto business.