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Robinhood's crypto trading division Robinhood Crypto is set to pay a $30 million settlement to the New York State Department of Financial Services (NYDFS). This comes after investigations discovered that the firm had violated regulatory requirements relating to anti-money laundering and cybersecurity.
Robinhood Facing Several Regulatory Matters
The retail trading platform, which has been under investigation by the NYDFS since July 2020, plans to pay the settlement as part of a proposed deal. In addition to the monetary penalty, Robinhood Crypto will be required to “engage a monitor,” according to a recent S-1 filing. Robinhood first disclosed the investigation with the New York regulators earlier this month when it filed paperwork to go public. However, at the time, the company said it would only pay a fine of $10 million for allegedly violating state rules, according to the Wall Street Journal. State and federal regulators in the US have increased their scrutiny of cyber protections, especially when it comes to cryptocurrency-related transactions. Last December, the US Securities, and Exchange Commission (SEC) also slammed a $65 million fine on Robinhood. The firm was said to have allegedly provided customers misleading information about its revenue source in its communications with clients between 2015 and late 2018. Robinhood is also facing a Financial Industry Regulatory Authority (FINRA) probe for failing to protect customers. Last month, the retail trading platform was asked to pay a $70 million penalty for its systemwide outages and false or misleading communication and trading practices. The false information consisted of allegations ranging from customer's cash holdings in the app accounts, misrepresented margin trades, the risk of loss in options transactions, the extent of the buying power users had, and information regarding margin calls. FINRA has previously penalized Robinhood for trading violations. In December 2019, the regulator fined the online broker $1.25 million for violating best execution rules. FINRA's best execution rule stipulates firms to use reasonable diligence in ascertaining the best market for their clients. The law states that brokers must put clients' interests first in all dealings.
Robinhood Forging Ahead With IPO plans
Despite the recent legal and regulatory tussle, Robinhood is reportedly planning to start trading on the Nasdaq next week. Although Robinhood has not officially given a date for its Initial public offering (IPO), a familiar source, according to CNN, confirmed that the big debut is slated for July 29. Robinhood aims to raise up to $2.3 billion in the IPO that could value the controversial company at $35 billion. Headquartered in Menlo Park, California, Robinhood was founded in 2013 by Vladimir Tenev and Baiju Bhatt. It officially launched its mobile app for users to invest in commission-free trades of stocks and exchange-traded funds in 2015.