The online brokerage firm Robinhood has landed themselves in regulatory trouble, after it has emerged that their crypto division will have to pay a New York regulator a $15 million settlement following an anti-money laundering probe.
According to flings with the SEC, Robinhood disclosed that they were facing penalties over anti-money laundering and cybersecurity. Resulting in a $15 million penalty and the addition of a monitor who will ensure that the firm adheres to anti-money laundering and cybersecurity practices.
This is not the first time that Robinhood has got itself into hot water, only last month the firm had to pay out $70 million in penalties to the Financial Industry Regulatory Authority (FINRA) for its systemwide outages and misleading communication and trading practices.
The regulatory organization released a statement addressing the fine:
“FINRA considered the widespread and significant harm suffered by customers, including millions of customers who received false or misleading information from the firm, millions of customers affected by the firm’s systems outages in March 2020, and thousands of customers the firm approved to trade options even when it was not appropriate for the customers to do so,”
Robinhood recently filed to go public, and will trade under the ticker HOOD. The number of controversies that the organization has experienced this year alone has not stopped the overall growth of the company, and strong support of the much anticipated IPO.
The strong interest in Robinhood crypto is fueled in part by the boom of crypto meme stocks and the younger generation of retail traders who make use of accessible trading platforms such as Robinhood. The rise in cryptocurrency transactions was noted in Robinhood’s IPO prospectus, where it revealed that 17% of transaction-based revenue in the latest quarter came from cryptocurrencies.
Dogecoin, in particular, is responsible for a substantial portion of cryptocurrency revenue on the platform. Robinhood warned their investors that should the current demand for Dogecoin decline, their business may be affected:
"A substantial portion of the recent growth in our net revenues earned from cryptocurrency transactions is attributable to transactions in Dogecoin. If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition, and results of operations could be adversely affected,"
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.