ALBANY, N.Y.—Popular investing app Robinhood Markets will pay New York financial regulators $30 million to settle findings that its cryptocurrency trading division had poor cybersecurity and failed to monitor for illegal transactions.
The New York Department of Financial Services says an audit conducted during most of 2019 of Robinhood Crypto revealed an understaffed cybersecurity operation that lacked adequate risk assessment procedures. The company's incident response plan lacked a process for notifying regulators and law enforcement in the event of an incident, the state reveals in the consent order ending the matter, according to InfoRisk Today reported.
Regulators say the trading platform throughout 2020 also had a substantial backlog in evaluating suspicious transactions for potential fraud or money laundering. By late October, the pile of unevaluated transactions climbed up to nearly 4,400, InfoRisk Today said.
As part of the settlement agreement, Robinhood is required to engage an independent consultant for the next year and a half to monitor remediation efforts.
Robinhood is publicly traded; it's most recent quarterly filing shows 15.9 million monthly active users and $19.7 billion in cryptocurrency assets under custody, InfoRisk Today noted.
‘Failed to Invest’
"Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance," said Adrienne Harris, New York superintendent of financial services.
All virtual currency companies licensed in New York are subject to the same anti-money laundering, consumer protection and cybersecurity regulations as traditional financial services companies, she added.
In a statement, Robinhood associate general counsel Cheryl Crumpton said the company has made significant progress in building out its compliance programs. "We remain proud to offer a more accessible, lower-cost platform to buy and sell crypto.”