- Trending
- Comments
- Latest
Two Robinhood engineers used confidential knowledge of upcoming crypto listings to trade ahead of them, not on Robinhood, but on the rival decentralized exchange Hyperliquid, federal prosecutors alleged Tuesday.
Hefu Chai and Huaisong Xiang each face up to 20 years in prison on wire fraud and commodities fraud charges after allegedly profiting more than $50,000 apiece.
The Justice Department alleges that Chai and Xiang’s positions as Robinhood engineers gave them access to confidential information concerning potential cryptocurrency listings on Robinhood Crypto, the company’s digital asset trading platform.
Prosecutors say the engineers used that information to buy perpetual futures linked to cryptocurrency tokens on Hyperliquid before Robinhood publicly announced that the same tokens would be listed.
The alleged activity occurred between 2025 and 2026. According to the complaints, the trades were made while the two employees possessed material nonpublic information about Robinhood’s planned listings.
The allegations are central to the Robinhood insider trading investigation because the defendants allegedly traded financial derivatives rather than directly purchasing the cryptocurrencies that Robinhood was preparing to list.
U.S. Attorney Jamie McDonald said the case demonstrates that confidential corporate information cannot lawfully be used for personal financial gain.
«“Misappropriating confidential information to trade in the derivatives markets for personal benefit is illegal,” — Jamie McDonald, U.S. Attorney for the Southern District of New York.»
McDonald added that prosecutors would pursue cases involving the alleged misuse of corporate information even when the trading involves derivatives and other financial instruments.
The case involves perpetual futures, a type of derivative that allows traders to take positions on the future price movement of an underlying asset without owning the asset itself.
Unlike conventional futures contracts, perpetual futures do not have an expiration date. Traders can maintain their positions indefinitely, although they must make or receive periodic funding payments designed to keep the derivative’s price aligned with the underlying asset’s spot price.
According to prosecutors, the alleged Robinhood insider trading scheme took advantage of the potential market impact of new cryptocurrency listings.
The complaints allege that Chai and Xiang repeatedly purchased perpetual futures tied to cryptocurrencies shortly before Robinhood publicly announced that those tokens would become available for trading on Robinhood Crypto.
The timing of those transactions is a key element of the government’s allegations. Prosecutors say the engineers knew about the upcoming listings because of information obtained through their employment at Robinhood and that they breached their obligations to keep that information confidential.
Each defendant allegedly generated more than $50,000 in profits from the trades.
The case therefore illustrates how confidential information about a centralized crypto platform can potentially intersect with trading activity on a separate decentralized derivatives exchange.
Chai and Xiang each face one count of violating the Commodity Exchange Act and one count of wire fraud.
The Commodity Exchange Act charge carries a maximum potential sentence of 10 years in prison, while the wire fraud charge carries a maximum potential sentence of 20 years. The Justice Department stressed, however, that those are statutory maximums and that any eventual sentence would be determined by the judge.
FBI Assistant Director in Charge James C. Barnacle Jr. said the agency was pursuing allegations that employees had used sensitive information from their employer for personal benefit.
«“These charges make clear the FBI with its partners will act when individuals access sensitive business information for their own benefit.” — James C. Barnacle Jr., FBI Assistant Director in Charge of the New York Field Office.»
The allegations also highlight the regulatory issues surrounding Robinhood insider trading claims when confidential information is allegedly used to trade derivatives rather than traditional stocks.
The Justice Department said McDonald praised the FBI’s work and thanked Robinhood for cooperating with the investigation. The prosecution is being handled by the Securities and Commodities Fraud Task Force, with Assistant U.S. Attorney Alexandra N. Rothman leading the case.
The Robinhood insider trading allegations remain accusations at this stage. The Justice Department explicitly stated that Chai and Xiang are presumed innocent unless and until they are proven guilty.
The prosecution could also draw attention to the changing landscape of digital-asset markets, where information concerning token listings can potentially affect trading activity across multiple venues.
The alleged conduct involved Robinhood Crypto on one side and Hyperliquid’s decentralized derivatives market on the other. Prosecutors allege that the defendants obtained confidential information through their employment at Robinhood and used it to trade an external market before the information became public.
The Robinhood insider trading allegations therefore concern not only the confidentiality of corporate information but also how such information can allegedly be used across different parts of the cryptocurrency market.
McDonald said the government’s position extends to derivatives and other instruments, noting that corporate insiders cannot avoid securities and commodities laws simply because the financial product being traded differs from traditional securities.
For the defendants, however, the Robinhood insider trading case has yet to reach a determination on guilt. The complaints contain allegations rather than findings of fact established at trial.
The Robinhood insider trading investigation remains a federal criminal matter, with Chai scheduled to appear in the Northern District of California and Xiang appearing before U.S. Magistrate Judge Ona T. Wang in New York.
Copyright © 2025 - The Bit Gazette.
