The $15 million fine imposed by the state of New York is the latest in a string of fines levied on Robinhood. It also emphasises the regulatory danger of working in the cryptocurrency space.
Robinhood has set aside $15 million to settle a legal dispute with the New York State Department of Financial Services (NYDFS) over allegations related to its crypto unit’s handling of cybersecurity and anti-money laundering. The dispute stems from allegations related to the crypto unit’s handling of cybersecurity and anti-money laundering.
As a result of the announcement, which was hidden in a footnote in an SEC filing from last week, the popular stock-buying app will face heightened regulatory scrutiny as it attempts to expand its rapidly growing cryptocurrency operations.
According to the filing, Robinhood set aside $10 million in the previous year to deal with the NYDFS action, and another $5 million in the first quarter of this year to deal with the same issue.
The announcement of the NYDFS settlement comes just a week after Robinhood agreed to pay a $70 million fine to the Financial Industry Regulatory Authority (FINRA), the largest of its kind, for outages and miscommunications that the federal regulator determined caused “significant harm” to Robinhood customers.
There is little information in the file pertaining to the New York settlement regarding the substance of the charges. In it, the NYDFS simply indicates that the action relates to Robinhood’s crypto branch, known as RHC, and that it is “focused primarily on anti-money laundering and cybersecurity-related issues.”
Also noted by Robinhood is a recent “a settlement in principle,” between the company and the New York State Department of Financial Services, and that “RHC will pay a monetary penalty and engage a monitor.”
The Wall Street Journal, which was the first to report on the settlement on Wednesday, was unable to obtain any additional information from either Robinhood or the NYDFS on the case.
While a financial penalty of $15 million (the final sum could be somewhat more or lower depending on the circumstances) is not considered for a firm of Robinhood’s size, the requirement to “engage a monitor” could be significantly more burdensome.
As a result of their appointment by the court, monitors are granted access to the confidential activities of a company—a move that corporations fiercely oppose and which might potentially stymie Robinhood’s ambitions to expand its cryptocurrency operations in order to compete with the likes of Coinbase.
As part of its final preparations before going public, Robinhood stated that it held more than $11 billion in cryptocurrencies for its customers, with Dogecoin accounting for a large chunk of its trading operations. The SEC filing was the final step before going public.
The announcement of the NYDFS settlement comes just a week after Robinhood agreed to pay a $70 million fine to the Financial Industry Regulatory Authority (FINRA), the largest of its kind, for outages and miscommunications that the federal regulator determined caused “significant harm” to Robinhood customers.
