Key Takeaways:
- Robinhood’s two engineers face fraud charges for alleged trading in cryptocurrencies about to be listed.
- Both were rumored to have made over $50,000 trading Hyperliquid perpetuals.
- Conviction of the charges could mean up to 30 years imprisonment.
Two of Robinhood’s engineers have been charged with federal crimes aimed at using confidential data of proposed crypto listings to conduct trades in perpetual futures with Hyperliquid. The on-chain derivatives are on center stage in U.S. fraud enforcement.
Engineers Allegedly Traded Before Robinhood Listings
The U.S. Attorney’s Office for the Southern District of New York unsealed complaints against Hefu Chai, 36, and Huaisong Xiang, 30, on September 15. Both worked as engineers at Robinhood and allegedly had access to nonpublic information about cryptocurrencies the company planned to add to Robinhood Crypto.
Those two used that data multiple times during the 2025-2026 period to make ongoing futures trades on Hyperliquid, long before Robinhood went public with its own releases of the corresponding tokens.
The rumored plan didn’t call for them to purchase the underlying cryptocurrencies. They, instead, leveraged their holdings in perpetuals, hoping to benefit from movements in the price after Robinhood’s statements.
The alleged trades netted each defendant over $50,000, prosecutors say. The public grievances do not specify which cryptocurrencies are under attack.
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Hyperliquid Became the Trading Venue
Hyperliquid is a decentralized derivatives exchange providing perpetual futures related to cryptocurrencies and other assets. These contracts have no traditional expiration date, hence traders can hold them for as long as they like, while payments for funding expenses tend to make the price of these contracts somewhat stay in line with the price of the underlying market.
That set up provided the alleged traders a possibility to speculate without owning the bodily tokens.
The DOJ case is significant as the alleged behavior took place via a decentralized trading platform. Corporate insiders can’t evade the securities and commodity laws by trading perpetual futures or other related financial vehicles, U.S. Attorney Jamie McDonald said.
Fraud Charges Could Carry 30 Years
Chai and Xiang have all incurred one count of commodities fraud and one count of wire fraud. According to the DOJ, the maximum prison term for the Commodity Exchange Act charge is 10 years, and wire fraud is up to 20 years. The sentences listed here are maximums and not their expectations of what sentences may be awarded by the courts.
The FBI said it investigated allegations that the engineers used sensitive business data they’ve gathered from their jobs.
Federal prosecutors say Robinhood actively assisted with the investigation. The case is being investigated by the Securities and Commodities Fraud Task Force in the U.S. Southern District.
The claims also raise another major issue for enforcement on crypto exchanges: Can the decentralized nature of these platforms be used to avoid U.S. commodities and fraud laws?
In this one, it’s not Hyperliquid itself that’s being targeted but rather the use of confidential information. Defendants haven’t been charged. Chai and Xiang are presumed not to be guilty based on U.S. law.
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