Robinhood Crypto, the digital currency arm of Robinhood stock trading platform, is set to fork out $15 million in a settlement with a New York regulator. According to regulatory filings, the settlement is in connection with anti-money laundering and cybersecurity issues.
Robinhood Crypto has become popular in the past year amid the rise in popularity of digital currency trading. However, just as with its stock trading arm, Robinhood appears to be unable to steer clear of regulatory trouble. Just over a week ago, it emerged that the online brokerage firm is set to pay $70 million in penalties to the Financial Industry Regulatory Authority (FINRA) after it was found to have caused “significant harm to its users.”
Now, its digital currency division is set to settle with the New York Department of Financial Services (NYDFS). In a regulatory filing with the SEC, the company revealed it’s facing the penalties over issues related primarily to anti-money laundering and cybersecurity. No further details about the nature of the issues were revealed, with the NYDFS and Robinhood declining to comment to the Wall Street Journal, which first broke the story.
Aside from paying the tentative $15 million penalty, Robinhood will have to engage a monitor. This is an individual who surveils a company’s activities and evaluates its compliance to certain practices. In the Robinhood case, the monitor will ensure that the firm adheres to anti-money laundering and cybersecurity practices.
The filings also revealed that Robinhood set aside $10 million for the anticipated NYDFS settlement last year. It then set aside $5 million in the Q1 this year for the same.
The NYDFS deal is just the latest in a string of regulatory crackdowns—and settlements—that the Menlo Park, California-based company has engaged in over the past two years. Robinhood has become immensely popular during the lockdowns as more people turned to online stock and digital currency trading. On the flip side, the massive user numbers have seen the company drop the ball on several occasions.
Robinhood Crypto has continued to list ‘useless’ memecoins that are only good for speculations and pump and dumps, while ignoring digital currencies with utility and a solid user base. But then again, Coinbase is riding the same rollercoaster.
Dogecoin is perhaps the best example. The memecoin has become such a significant part of Robinhood that in its IPO prospectus, the company claimed that its earnings will be significantly hurt “if the markets for Dogecoin deteriorate”—and they inevitably will. Dogecoin accounted for over a third of Robinhood Crypto’s revenues in Q1.