Robinhood engineers charged over $50K crypto scheme

Federal prosecutors have charged two Robinhood engineers with commodities fraud and wire fraud after each allegedly earned more than $50,000 by trading crypto perpetual futures with confidential listing information.

Robinhood engineers allegedly traded before listings

The U.S. Attorney’s Office for the Southern District of New York announced the charges against Hefu Chai, 36, and Huaisong Xiang, 30, also known as Jerry Xiang, on Sep. 15.

Both defendants worked as engineers at Robinhood Markets during the alleged conduct. According to the criminal complaints, their jobs gave them access to confidential information about which cryptocurrencies Robinhood Crypto planned to add to its platform and when the listings would become public.

Prosecutors allege that Chai and Xiang used the information between 2025 and 2026 to open perpetual futures positions linked to the planned listings. Rather than buying the underlying tokens, they allegedly placed the trades through Hyperliquid before Robinhood released its announcements.

Once the listings became public, prosecutors said the prices of several related cryptocurrencies rose, allowing both defendants to close profitable positions. Each engineer allegedly made more than $50,000 through trades tied to Robinhood’s private listing plans.

The complaints accuse Chai and Xiang of breaching their duties to protect their employer’s confidential information. Prosecutors have not identified every cryptocurrency involved in the alleged trades in the public announcement.

As crypto.news reported in June, Robinhood’s Worldcoin listing announcement gave customers access to WLD while the token was experiencing sharp price swings. WLD fell nearly 15% around the listing period despite gaining access to Robinhood’s customer base, showing that a platform addition does not always produce a lasting rally.

Hyperliquid perpetuals formed the alleged trading route

Hyperliquid operates a decentralized derivatives platform where traders can take long or short positions through perpetual futures. Unlike standard futures, perpetual contracts do not have fixed expiration dates and use recurring funding payments to keep their prices close to the referenced assets.

According to prosecutors, the absence of an expiry date allowed Chai and Xiang to establish positions before Robinhood’s announcements and hold them until the expected price movements occurred. The complaints allege that both engineers possessed material nonpublic information when they entered the trades.

Hyperliquid records trades on public blockchain infrastructure, but users can interact with its markets without buying the assets referenced by the contracts. July coverage of Hyperliquid’s protocol upgrades detailed how HIP-3 opened perpetual market creation to outside developers and expanded the platform beyond crypto tokens to instruments linked to stocks, commodities and indexes.

HIP-3 has operated on the mainnet since October 2025, while HIP-4 went live in May 2026 with support for prediction and event markets. Hyperliquid’s expanding range of instruments has placed its decentralized trading infrastructure closer to markets traditionally overseen by U.S. commodities and derivatives rules.

Although the alleged trades occurred on a decentralized venue, U.S. Attorney Jamie McDonald said the type of platform used did not remove the defendants’ legal obligations.

“Misappropriating confidential information to trade in the derivatives markets for personal benefit is illegal,” McDonald said.

The prosecutor added that traders cannot avoid U.S. securities and commodities laws by using perpetual futures, tokenized securities, or similar financial products.

US prosecutors apply commodities and wire fraud laws

Chai and Xiang each face one count of commodities fraud and one count of wire fraud. According to the Justice Department, the commodities charge carries a maximum prison term of 10 years, while wire fraud carries a maximum sentence of 20 years.

Any sentence would be determined by a federal judge after considering the U.S. Sentencing Guidelines and other statutory factors. The maximum penalties do not indicate what either defendant would receive if convicted.

The case gives U.S. readers a direct example of how federal prosecutors can pursue alleged misuse of corporate crypto information even when the trades do not involve ordinary shares or spot token purchases. Prosecutors framed the alleged perpetual positions as derivatives trades made with information taken from a U.S.-listed company.

Robinhood trades on Nasdaq under the HOOD ticker and offers crypto services through Robinhood Crypto. Its conventional brokerage, crypto, and derivatives products operate through separate affiliated entities with different regulatory arrangements.

Robinhood’s official disclosures state that its U.S. futures and cleared swaps business operates through Robinhood Derivatives, a futures commission merchant registered with the Commodity Futures Trading Commission and a member of the National Futures Association. Robinhood Crypto is licensed by the New York State Department of Financial Services for virtual currency activity.

The alleged Hyperliquid trades were separate from customer transactions on Robinhood’s own platform. Prosecutors have accused the two employees of exploiting internal information rather than alleging that Robinhood customers lost funds or that the brokerage manipulated token prices.

FBI investigation leads to court appearances

FBI Assistant Director James C. Barnacle Jr. said the engineers allegedly used sensitive information obtained through their employment for personal profit. According to Barnacle, the charges show that the FBI and its partners will act when employees are accused of abusing confidential corporate information.

Chai was scheduled to make his first court appearance in the Northern District of California. Xiang was due to appear in Manhattan before U.S. Magistrate Judge Ona T. Wang in the Southern District of New York.

The charges arrive as Robinhood has increased its use of blockchain-based products. In September, its Ethereum layer-2 network experienced a 14-minute block-production halt that temporarily prevented transfers and smart contract calls from receiving confirmation.

Robinhood launched the chain’s public mainnet on July 1 with 95 tokenized stocks and wallet access in more than 120 countries. The network uses Ethereum for transaction fees and supports compatible wallets and applications, while its tokenized products remain separate from the alleged crypto listing trades described in the federal complaints.

Neither complaint represents a finding of guilt. Chai and Xiang are presumed innocent unless prosecutors prove the charges beyond a reasonable doubt in court.