New York Department of Financial Services Penalizes Robinhood

  • The New York Department of Financial Services accused Robinhood Crypto of endangering its users through multiple violations.

The New York Department of Financial Services announced a $30 million penalty against the cryptocurrency arm of the American financial firm, Robinhood, for violations related to fraud, consumer protection laws, and cybersecurity.

The department’s superintendent, Adrienne Harris, said in a release that Robinhood Crypto has been fined $30 million for failing in areas that violated New York regulations. Harris further noted that Robinhood’s crypto arm would enlist the services of an independent consultant to monitor and evaluate the company’s compliance efforts.

Commenting on the situation, superintendent Harris said about Robinhood,

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.

Harris further said that the New York Department of Financial Services will continue to probe institutions that are allegedly acting outside of the legal framework of operation. The NYDFS claimed it had conducted a close examination of Robinhood between January and September 2019 and discovered substantial shortcomings in Robinhood Crypto’s compliance function across many areas. The Department of Financial Services launched a full enforcement inquiry after it determined that the RHC had broken some Bank Secrecy Act and anti-money laundering regulations.

The NYDFS further claimed that Robinhood Crypto failed to switch to a sufficiently large transaction monitoring system or dedicate sufficient resources to appropriately address concerns and risks. According to the financial authority, Robinhood violated a supervisory agreement by failing to maintain on its website a telephone line for the receipt of client complaints.

Representatives from Robinhood claimed that the firm had made substantial progress in creating top legal, compliance, and cybersecurity programs. This would, however, not be the first time Robinhood has found itself in the books of financial regulators.

The U.S. Financial Industry Regulatory Authority fined Robinhood over $70 million in June 2021 for allegedly exposing thousands of users to harm and displaying systematic supervisory deficiencies beginning in September 2016.

In April 2021, the California Attorney General’s Office requested information related to Robinhood’s operations, trading platform, and overall business, as well as the firm’s compliance with California’s commodities laws.

Additionally, Robinhood was sued by the Massachusetts Securities Division (MSD) in December 2020 on grounds of unethical and dishonest behavior, failure to uphold its fiduciary duties, and other violations.

Lawrence Woriji Verified

Lawrence has covered some exciting stories in his career as a journalist, he finds blockchain-related stories very intriguing. He believes Web3 will change the world and wants everyone to be a part of it.

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