Federal prosecutors have charged two Robinhood engineers with commodities fraud and wire fraud after every allegedly earned greater than $50,000 by buying and selling crypto perpetual futures with confidential itemizing info.
Abstract
- Two Robinhood engineers allegedly traded earlier than the corporate introduced new cryptocurrency listings.
- Every defendant allegedly earned greater than $50,000 by means of perpetual futures positions on Hyperliquid.
- Commodities fraud carries a most 10-year sentence, whereas wire fraud carries as much as 20 years.
- The felony complaints stay allegations, and each engineers are presumed harmless until convicted.
Robinhood engineers allegedly traded earlier than listings
The U.S. Legal professional’s Workplace for the Southern District of New York announced the fees towards Hefu Chai, 36, and Huaisong Xiang, 30, often known as Jerry Xiang, on Sep. 15.
Each defendants labored as engineers at Robinhood Markets through the alleged conduct. In keeping with the felony complaints, their jobs gave them entry to confidential details about which cryptocurrencies Robinhood Crypto deliberate so as to add to its platform and when the listings would grow to be public.
Prosecutors allege that Chai and Xiang used the data between 2025 and 2026 to open perpetual futures positions linked to the deliberate listings. Somewhat than shopping for the underlying tokens, they allegedly positioned the trades by means of Hyperliquid earlier than Robinhood launched its bulletins.
As soon as the listings grew to become public, prosecutors stated the costs of a number of associated cryptocurrencies rose, permitting each defendants to shut worthwhile positions. Every engineer allegedly made greater than $50,000 by means of trades tied to Robinhood’s personal itemizing plans.
The complaints accuse Chai and Xiang of breaching their duties to guard their employer’s confidential info. Prosecutors haven’t recognized each cryptocurrency concerned within the alleged trades within the public announcement.
As crypto.information reported in June, Robinhood’s Worldcoin itemizing announcement gave clients entry to WLD whereas the token was experiencing sharp worth swings. WLD fell almost 15% across the itemizing interval regardless of getting access to Robinhood’s buyer base, exhibiting {that a} platform addition doesn’t all the time produce an enduring rally.
Hyperliquid perpetuals shaped the alleged buying and selling route
Hyperliquid operates a decentralized derivatives platform the place merchants can take lengthy or quick positions by means of perpetual futures. Not like customary futures, perpetual contracts would not have mounted expiration dates and use recurring funding funds to maintain their costs near the referenced property.
In keeping with prosecutors, the absence of an expiry date allowed Chai and Xiang to determine positions earlier than Robinhood’s bulletins and maintain them till the anticipated worth actions occurred. The complaints allege that each engineers possessed materials nonpublic info once they entered the trades.
Hyperliquid data trades on public blockchain infrastructure, however customers can work together with its markets with out shopping for the property referenced by the contracts. July protection of Hyperliquid’s protocol upgrades detailed how HIP-3 opened perpetual market creation to exterior builders and expanded the platform past crypto tokens to devices linked to shares, commodities and indexes.
HIP-3 has operated on the mainnet since October 2025, whereas HIP-4 went reside in Might 2026 with help for prediction and occasion markets. Hyperliquid’s increasing vary of devices has positioned its decentralized buying and selling infrastructure nearer to markets historically overseen by U.S. commodities and derivatives guidelines.
Though the alleged trades occurred on a decentralized venue, U.S. Legal professional Jamie McDonald stated the kind of platform used didn’t take away the defendants’ authorized obligations.
“Misappropriating confidential info to commerce within the derivatives markets for private profit is against the law,” McDonald stated.
The prosecutor added that merchants can’t keep away from U.S. securities and commodities legal guidelines through the use of perpetual futures, tokenized securities, or comparable monetary merchandise.
US prosecutors apply commodities and wire fraud legal guidelines
Chai and Xiang every face one rely of commodities fraud and one rely of wire fraud. In keeping with the Justice Division, the commodities cost carries a most jail time period of 10 years, whereas wire fraud carries a most sentence of 20 years.
Any sentence could be decided by a federal decide after contemplating the U.S. Sentencing Tips and different statutory elements. The utmost penalties don’t point out what both defendant would obtain if convicted.
The case provides U.S. readers a direct instance of how federal prosecutors can pursue alleged misuse of company crypto info even when the trades don’t contain odd shares or spot token purchases. Prosecutors framed the alleged perpetual positions as derivatives trades made with info taken from a U.S.-listed firm.
Robinhood trades on Nasdaq below the HOOD ticker and provides crypto companies by means of Robinhood Crypto. Its typical brokerage, crypto, and derivatives merchandise function by means of separate affiliated entities with completely different regulatory preparations.
Robinhood’s official disclosures state that its U.S. futures and cleared swaps enterprise operates by means of Robinhood Derivatives, a futures fee service provider registered with the Commodity Futures Buying and selling Fee and a member of the Nationwide Futures Affiliation. Robinhood Crypto is licensed by the New York State Division of Monetary Companies for digital foreign money exercise.
The alleged Hyperliquid trades had been separate from buyer transactions on Robinhood’s personal platform. Prosecutors have accused the 2 workers of exploiting inner info reasonably than alleging that Robinhood clients misplaced funds or that the brokerage manipulated token costs.
FBI investigation results in courtroom appearances
FBI Assistant Director James C. Barnacle Jr. stated the engineers allegedly used delicate info obtained by means of their employment for private revenue. In keeping with Barnacle, the fees present that the FBI and its companions will act when workers are accused of abusing confidential company info.
Chai was scheduled to make his first courtroom look within the Northern District of California. Xiang was because of seem in Manhattan earlier than U.S. Justice of the Peace Decide Ona T. Wang within the Southern District of New York.
The costs arrive as Robinhood has elevated its use of blockchain-based merchandise. In September, its Ethereum layer-2 community skilled a 14-minute block-production halt that briefly prevented transfers and good contract calls from receiving affirmation.
Robinhood launched the chain’s public mainnet on July 1 with 95 tokenized shares and pockets entry in additional than 120 international locations. The community makes use of Ethereum for transaction charges and helps appropriate wallets and purposes, whereas its tokenized merchandise stay separate from the alleged crypto itemizing trades described within the federal complaints.
Neither criticism represents a discovering of guilt. Chai and Xiang are presumed harmless until prosecutors show the fees past an affordable doubt in courtroom.
