Robinhood Crypto Faces $10M Fine for Alleged Cybersecurity, AML Violations
The crypto division of Robinhood expects to pay a minimum of $10 million to New York regulators for alleged violations relating to cybersecurity and anti-money laundering.
It also state that this penalty could exceed $15 million, depending on an investigation that is examining potential laxity in security practices. The company will pay New York regulators for the alleged breach of rules, which only relates to its cryptocurrency division.
It has already been ordered to pay a $70 million fine by the Financial Industry Regulatory Authority (FINRA). The filing states that Robinhood was accused of,
“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.”
In a time when countries across the world are scrutinizing crypto entities for their compliance standards, this development is not altogether unsurprising. The United States has also suffered from a cyberattack that saw the Colonial Pipeline infrastructure compromised. The attackers expected payment in bitcoin, which resulted in lawmakers making cybersecurity a priority.
The filing is a part of the Initial Public Offering (IPO) process that Robinhood is carrying out. The firm has been preparing to launch an IPO for months now, but several incidents have acted as minor obstacles, stalling the company from being able to carry out its plans within its initial time frame. It will likely hold the IPO this month or the next, and there’s no doubt that investors and analysts will keep a close eye on it.
Robinhood IPO — make or break?
Robinhood has a rollercoaster year. Despite all of the incidents that it has gone through, including criticism for its handling of GameStop and platform issues, the company is growing at an incredible rate. It’s clear that it wish to capitalize on the momentum with the IPO launch, but it isn’t guaranteed that it is going to be a smooth ride.
There’s no doubt that Robinhood is performing well by user metrics and revenue, but there’s also some caution to be taken in the form of its public perception. The criticism following negative events was strong, and now the regulators’ scrutiny will bring even more concern about growth.
The IPO will no doubt have an enthusiastic influx of funds, as IPOs have been in the past 12 months. But Robinhood will have to make some significant steps forward if it is to overcome the effects of the past six or so months. Regaining the trust of customers will be a long and drawn-out effort, and there will always be some scrutiny, but perhaps the firm will take action that will return some legitimacy to its idea of “democratizing finance for all.”
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