Robinhood, the investing app, ignored rules that keep your money safe

In late 2017 the crypto craze was on. Bitcoin was reaching record highs by the day, turning speculators into overnight millionaires. Robinhood, a four-year-old startup with grand ambitions to upend the financial world by letting investors make trades on their smartphones, wanted in on the action.

Vlad Tenev and Baiju Bhatt, Robinhood’s founders and co-CEOs, called an emergency town-hall-style meeting at the company’s Menlo Park headquarters that December to lay out the game plan: Robinhood was going to update its app to let users buy and sell cryptocurrencies from their phones. To cash in on the fervor, the team would need to move fast. They had six weeks to meet the end-of-January deadline.

That’s an extremely quick turnaround for a complex product that puts real money at stake. Staffers got caught up in the thrill of the cofounders’ crypto challenge, but major questions set in as the launch date approached. Would the company’s back-end software — which one former executive said was “held together with toothpicks and bubble gum” — hold up under pressure? Was the company pushing its customers toward risky investments without providing proper education? Would Robinhood be exposing itself to an immense risk of fraud?

“Everyone at the company is mad at me,” Bhatt acknowledged in one meeting, according to the former Robinhood executive. “Everyone was telling me not to do it, that I was pushing too hard and that we’re risking our customers’ money on crypto.”

But Bhatt didn’t let the naysayers change his course. As engineers cancelled holiday travel plans and worked frantically to meet the crypto project’s deadline, motivational posters appeared in the office hallways and bathrooms: “Don’t Sleep.” The phrase would eventually be used to market the product — as in “Don’t sleep on crypto” — but some sleep-deprived employees saw the message as a direct order from their frenzied founders.

As Robinhood staff raced to meet a deadline to launch the new…

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