Tough week for Robinhood: 25% of staff cuts and $30 million fine for money laundering violation
Categories: Crypto News US
Toughweek for Robinhood: 25% of staff cuts and $30 million fine for money launderingviolation
California-based crypto trading platform Robinhood has beenfined US$30 million by a New York regulator for failing in its anti-moneylaundering obligations. To make matters worse, the company was also forced tolay off 25 per cent of its employees as performance did not live up toexpectations.
Additionalcyber security and consumer protection violations
The New York State Department of Financial Services (NYDFS) has releaseddetails of the fines.In addition to its anti-money laundering failure, Robinhoodis to be punished for cybersecurity and consumer protection breaches.
The cyber security program of the platform was found to lackadequate resources to address the risk. Its crypto division also failed totransition from a manual transaction monitoring system to a more adequate onefor its user size and transaction volume in a timely manner. Unfortunately forRobinhood, the bad news doesn't stop there.
On August 2, the company issued a message from its CEO andco-founder Vlad Tenev, announcing that the company would be forced to cut abouta quarter of its workforce.
Ironically,Robinhood's cybersecurity program was found to be inadequately staffed, blamingoverhiring in 2021 for layoffs in anticipation of increased retail engagementwith the stock and crypto markets.Performance failed to meet expectations, andRobinhood is up for approximately US$30-40 million in employee benefit costsand severance cash restructuring fees.
OneOrdinary Year Follows Another
Last year Robinhood also made news several times for all the wrongreasons.In July, the crypto trading app was fined US$70 million for misleadingits customers. Then in October, Robinhood experienced a 78 percentdrop in its Q3 crypto revenue. User growth in the investment app hadskyrocketed as retail investors piled into stocks and crypto in the wake of theCOVID-19 financial meltdown of March 2020. As a result, Memecoins was receivinga lot of attention and Robinhood's exposure to DOGE was blamed for declining.