Former Robinhood Software Engineers Face Federal Charges for Insider Crypto Trading
The two ex-employees reportedly generated profits exceeding $50,000 apiece through trading Hyperliquid perpetual contracts using advance knowledge of Robinhood's token listing schedule.
Federal prosecutors announced charges on Tuesday against two former software engineers from Robinhood, accusing them of commodities fraud and wire fraud for allegedly leveraging privileged information regarding forthcoming cryptocurrency listings to generate profits through perpetual futures trading on the Hyperliquid platform.
The US Department of Justice (DOJ) stated that Hefu Chai and Huaisong "Jerry" Xiang purchased perpetual contracts associated with various tokens before they were officially listed on Robinhood Crypto. According to DOJ allegations, both individuals generated profits exceeding $50,000 from these transactions conducted between 2025 and 2026.
Prosecutors from the DOJ revealed that both Chai and Xiang possessed access to a restricted company Slack channel that housed details regarding upcoming token listings. The government alleges the pair exploited this privileged information to establish long positions on the Hyperliquid platform, subsequently closing these positions after the tokens appreciated in value following their official launch on Robinhood.
The charges bear resemblance to the 2023 insider-trading prosecution involving Coinbase, where a former staff member utilized confidential listing information to generate profits by purchasing the actual underlying tokens directly, though the current Robinhood case represents an expansion of such conduct into decentralized derivatives trading platforms.
Cointelegraph reached out to Robinhood seeking comment but had not received a response at the time this article was published.
Robinhood barred employees from trading around listings
The DOJ's legal complaints indicate that Chai was employed at Robinhood from approximately 2021 through May 2026, where he held the position of technical lead with responsibility for onboarding new digital-asset listings. Xiang's employment spanned from roughly 2024 until September 2026, during which he functioned as a software engineer with involvement in cryptocurrency listing operations.
Both engineers received the internal designation of "Coin Aware Individuals" at Robinhood, which granted them access to a restricted Slack channel containing information about scheduled listing dates, as detailed in the legal complaints.
According to company regulations, individuals belonging to this group were expressly forbidden from executing trades on Robinhood or any alternative trading platform during the 24-hour window preceding or following any listing or delisting announcement.
Federal prosecutors allege that Chai executed perpetual contract trades in advance of no fewer than 10 listing announcements for various tokens, including Cat in a dogs world (MEW), Moo Deng (MOODENG), Aster (ASTER), Plasma (XPL), Hyperliquid (HYPE), Ethena (ENA) and Aerodrome Finance (AERO). Xiang purportedly initiated his trading activity with Popcat (POPCAT) perpetuals in March 2025, subsequently trading ahead of no fewer than 10 additional listing announcements.
US Attorney Jamie McDonald emphasized that corporate insiders are unable to circumvent securities and commodities regulations by executing trades based on misappropriated confidential information through perpetual futures contracts, tokenized securities or comparable financial instruments.
Both defendants are charged with one count of violating the Commodity Exchange Act, which carries a potential maximum prison sentence of 10 years, alongside one count of wire fraud, which carries a potential maximum sentence of 20 years.
The accusations leveled against Chai and Xiang constitute allegations at this stage, and both individuals maintain the presumption of innocence until proven guilty through conviction.