Robinhood’s Crypto Unit Faces $10M Penalty Over Money Laundering Violations
“Robinhood Crypto” the cryptocurrency brokerage unit of trading app Robinhood is facing a $10 Million penalty by New York regulators. Robinhood Crypto is penalized for allegedly violating state rules on cybersecurity and anti-money laundering.
Robinhood Unable to Get Over GME & Dogecoin (DOGE) Saga
In January 2021, GameStop (GME) stock suffered a short squeeze primarily driven by a reddit group called Wallstreet aimed to bleed hedge fund and institutional short sellers. This group majorly consists of retail investors and Robinhood was one among key platforms where trading volumes were broke all time highs.
Similarly, following endorsements from Elon Musk retail interest in cryptocurrency Dogecoin (DOGE) spiked and reached an all time high price of $0.73. Dogecoin trading volume at Robinhood were off the charts as Dogecoin entered top 5 cryptocurrencies.
During the period Robinhood suffered several technical glitches and also halted crypto deposits. Traders were specifically barred from trading in Dogecoin (DOGE) at several occasions. This soon caught regulator attention and Robinhood was charged whooping $70 Million for technical outages and missteps related to options trading.
Regulations to Tighten Up Amid Rising Criminal Hacking
The final penalty amount may well exceed $15 Million and Robinhood may face tougher cybersecurity guidelines moving ahead. In its regulatory filing with SEC Robinhood said,
“certain deficiencies in our policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in our application development security,”
Last week Robinhood warned users about cyberattacks and informed that its bottom line might be affected. Also Robinhood user accounts were compromised last year and since then SEC, the Financial Industry Regulatory Authority and New York state are all investigating Robinhood.
The regulatory concerns are also a direct result of hacks of colonial pipeline and meatpacker JBS SA, the incidents that disrupted US supply chains. The rising threat of criminal hacks and cryptocurrency ransoms is leading to more strict and tougher cyber compliance for companies like Robinhood.