Economy, Stock Market and Business News of August 2, 2022

Credit…Sasha Maslov for The New York Times

Robinhood, the trading app that popularized one-click trading and helped fuel last year’s meme stock frenzy, said Tuesday that it was laying off about 23 percent of its workforce.

Vlad Tenev, CEO of Robinhood, said in a blog post that the layoffs would affect employees across the company, especially those in operations, marketing and program management roles.

Robinhood declined to comment on the layoffs.

The announcement closely followed the cuts in April, when Robinhood laid off 340 workers, or about 9 percent of its employees at the time. Since then, Mr. Tenev wrote, a further worsening of the economy, including inflation and crypto market crash, has “reduced client trading activity and assets under custody.” The price of Bitcoin has more than halved this year, to around $23,000 per coin. The cryptocurrency rose as high as $66,000 at the end of 2021.

The layoffs occur as part of a wave of job cuts in technology companies, including some cryptocurrency companies In June, cryptocurrency exchanges including Coinbase and Gemini announced that they were laying off employees. Last week, Shopify, an online marketplace, announced that it was court 10 percent of its 10,000 employees.

In his memo on Tuesday, Tenev said that Robinhood misjudged the economy and business activity. “As CEO, I have approved and taken responsibility for our ambitious staff journey, this is up to me,” he wrote.

The company also launched its second quarter results on Tuesday, reporting that its monthly active user count dropped to 14 million in June, a decrease of 1.9 million.

The turbulence represents a major downturn for Robinhood, which became a key player in the meme stock craze in early 2021 as investors rallied to boost shares of companies including video game retailer GameStop and the AMC theater chain. On January 27, 2021, GameStop stock closed down nearly 1,800% from a few weeks earlier. a file. Robinhood then restricted trading in some meme stocks. The restrictions led shares to plummet. Lawsuitsa Securities and Exchange Commission research and congressional hearings soon followed.

Robinhood stock price skyrocketed during the meme stock trade. On August 7, 2021, the company was worth $46 billion, up 60 percent from its valuation a week earlier. But his shares have plunged 50 percent since the beginning of the year as he continues to deal with the fallout.

The layoffs come at a difficult time for fintech companies.

Publicly traded cryptocurrency exchange Coinbase laid off 18 percent of its staff in June amid the cryptocurrency market crash. Other major crypto companies, such as OpenSea, Gemini and crypto.comthey have also made job cuts.

“We all over-hire: Coinbase over-hire, Robinhood over-hire. When money was easy, they were just hiring, hiring, hiring,” said Dan Dolev, a senior analyst at Mizuho. “I’m not surprised to see these cuts.”

The overall value of the cryptocurrency market has shrunk to around $1 trillion from $3 trillion last year, when cryptocurrency trading enthusiasm peaked and Bitcoin price hit a new high.

Robinhood has been working to develop its crypto arm this year, listing new coins and launching a crypto wallet product. “The thing I liked least about Robinhood is its exposure to cryptocurrencies,” Dolev said. “Anything that doesn’t have intrinsic value is always prone to problems.”

Also Tuesday, the New York State Department of Financial Services announced that finish Robinhood crypto operation $30 million for violations of its anti-money laundering and cybersecurity regulations.

“As its business grew, Robinhood Crypto failed to invest adequate resources and attention to develop and maintain a culture of compliance,” Adrienne A. Harris, superintendent of financial services, said in a statement.

Cheryl Crumpton, Robinhood’s associate general counsel, said in a statement that the company was “pleased” the deal had been finalized. “We have made significant progress in creating industry-leading cybersecurity, compliance and legal programs, and we will continue to prioritize this work to better serve our clients,” she said.

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