Robinhood Crypto is fined for anti-money laundering, cybersecurity and consumer protection violations, lays off 23% of its staff as retail investors lose enthusiasm
The crypto division of online brokerage Robinhood faces a $30 million fine by the New York State Department of Financial Services. The regulator discovered plenty of failures at the brokerage, as it struggled to keep pace with the pandemic-driven customer demand for crypto services. At the same time, the company is slashing about 23% of its full-time staff, as trading demand slows. The layoffs are particularly concentrated in operations, marketing, and program management departments.
NYDFS found that Robinhood’s BSA/AML compliance program, including its transaction monitoring system, had significant deficiencies. Those include inadequate staffing and manual transaction monitoring that couldn’t properly handle the growing transaction volumes. Moreover, the watchdog revealed several violations in RHC’s cybersecurity program, consumer protection requirements, and compliance with the Department’s Transaction Monitoring Regulation and Cybersecurity Regulation.
Besides paying a $30 million penalty, Robinhood crypto will be required to appoint an independent consultant who will perform a comprehensive evaluation of the RHC’s compliance with regulations.
While the discovered failures reflect the company’s disability to manage the unprecedented customer growth during the pandemic, at present Robinhood’s monthly active users tumbled to 14 million, down 34% from a year earlier. Revenues also fell 44% to $318 million.
Therefore, Vlad Tenev, Robinhood’s chief executive, announced a headcount slash by approximately 23%, alongside a broader company reorganization. It would be the second round of the company’s layoffs this year. In April Robinhood had already reduced its staff by about 9%. However, Mr Tenev said the spring round of layoffs “did not go far enough” in helping the company cut costs. Together, the two rounds have erased more than 1,000 job positions from the company.