Economy, stock market and business news for August 2, 2022

attributed to him…Sasha Maslov for The New York Times

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

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

Robinhood declined to comment on the layoffs.

The announcement came on the heels of cuts in April, when Robinhood laid off 340 workers, or about 9 percent of its staff at the time. Since then, Mr. Tenev writes, further deterioration of the economy, including inflation and the crash of the cryptocurrency market, has “reduced client trading activity and assets held.” Bitcoin’s price has more than halved this year, to around $23,000 per coin. The cryptocurrency soared to $66,000 in late 2021.

The layoffs come as part of a wave of job cuts at tech companies, including some crypto companies. In June, crypto exchanges including Coinbase and Gemini announced that they would be laying off employees. Last week, Shopify, an online marketplace, announced that it would cut 10 percent of its 10,000 employees.

In his Tuesday note, Tenev said Robinhood misjudged the economy and business activity. He wrote: “As CEO, I have agreed and taken responsibility for our ambitious hiring path – and that is on me.”

The company also released its second-quarter results on Tuesday, and reported that the monthly number of active users fell to 14 million in June, a drop of 1.9 million.

The turmoil represents a major stumble for Robinhood, which became a major player in the meme-stock frenzy in early 2021, when investors banded together to raise shares of companies including video game store GameStop and movie theater chain AMC. On January 27, 2021, GameStop shares have closed nearly 1,800 percent of the past few weeks, a record. Subsequently, Robinhood restricted trading in some meme shares. The restrictions sent stocks lower. Lawsuits, Securities and Exchange Commission investigations, and congressional hearings soon followed.

Robinhood’s stock price is up during meme stock trading. On August 7, 2021, the company was valued at $46 billion, about 60 percent more than its valuation the previous week. But its stock is down 50 percent since the start of the year as it continues to grapple with the fallout.

The layoffs come at a difficult moment for fintech companies.

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

“Everyone hired too much – Coinbase hired too much, Robinhood hired too much. When money was easy, they were just hiring, hiring, hiring,” said Dan Dolev, chief analyst at Mizuho. “I’m not surprised to see these cuts. “

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

Robinhood is building its own crypto arm this year, listing new coins and launching a crypto wallet product. “One thing I like about Robinhood is their exposure to crypto,” Dolev said. “Anything that has no intrinsic value is always prone to problems.”

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

“As its business has grown, Robinhood Crypto has failed to invest the appropriate resources and attention to develop and maintain a culture of compliance,” Financial Services Superintendent Adrian A. Harris said in a statement.

Sheryl Crompton, Robinhood’s Assistant General Counsel, said in a statement that the company was “delighted” to have finalized the settlement. “We have made significant progress in building industry-leading legal, compliance and cybersecurity programs, and we will continue to prioritize this work to provide the best service to our customers,” she said.

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