Robinhood Crypto fined $30 million by NYDFS
Another big blow to Robinhood
It seems that Robinhood is similar to the troublemaker in school, who was always getting punished and sent to detention. It seems every time I read about Robinhood in the news, they are either being fined or investigated. Here we are again with yet another pretty hefty fine totaling $30 million. Robinhood has agreed to the pay the fine, levied on them by New York Department of Financial Services, due to anti-money laundering and cybersecurity-related violations. This ends a 2 year investigation by the NYDFS that started back in July of 2020.
“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,” Adrienne Harris, NYDFS Superintendent
Robinhood's rocky past
Back in December of 2020, Robinhood agreed to pay a civil penalty of $65 million to the SEC to settle charges for misleading customers regarding their "payment for order flow" business practice, and being "commission-free". Despite settling with the SEC, Robinhood never admitted or denied the allegations imposed on them.
“Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm. Brokerage firms cannot mislead customers about order execution quality." - Stephanie Avakian, SEC Enforcement Division Director.
"Robinhood failed to seek to obtain the best reasonably available terms when executing customers’ orders, causing customers to lose tens of millions of dollars. Today’s action sends a clear message that the Commission will not allow brokers to ignore their obligations to customers.” - Joseph Sansone, SEC Enforcement Division Market Abuse Unit Chief.
On June 30th of 2021, FINRA announced a fine totaling almost $70 million; approximately $12.6 million of which being restitution, plus interest, to thousands of affected customers. According to FINRA, the fines represent the largest financial penalty ever imposed and should reflect the scope and seriousness of the violations. This is the result of Robinhood causing significant harm to their customers by the imposed outages in March 2020, the reckless approval of Options trading for unqualified customers, and yet again, circulating false and misleading information.
This quote comes directly from Robinhood's S-1 filing, a few weeks after paying the $70 million FINRA fine, on July 19, 2021:
"In addition, we have been subject, and, given the highly regulated nature of the industries in which we operate, expect that we will be subject in the future, to a number of SEC and FINRA examinations and investigations, including examinations and investigations related to broker-dealer and financial services rules and regulations, including our trading and supervisory policies and procedures, our clearing practices, our public communications, our compliance with anti-money laundering and other financial crimes regulations, cybersecurity matters and our business continuity plans. We have also been subject, and may be subject in the future, to inquiries, investigations and examinations by other federal agencies such as the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) and state regulatory agencies, such as the Massachusetts Securities Division (the “MSD”) and the NYDFS." - Vladimir Tenev, Co-Founder, Chief Executive Officer and President
Clearly, after looking into the Robinhood's past and current actions, the company has not learned their lesson and I expect they never will. I foresee more fines and investigations in the Robinhood's future. But will any of this stop the stock-trading juggernaut? Only time will tell...and then we get to write about it!
See ya!
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