Federal prosecutors have brought fraud charges against former Robinhood Crypto engineers Hefu Chai, 36, and Huaisong “Jerry” Xiang, 30, alleging they used confidential information about upcoming token listings to make trades before the information became public.
Each defendant faces one commodities fraud count and one wire fraud count. According to the U.S. Attorney’s Office for the Southern District of New York, both allegedly earned more than $50,000 from trading activity conducted between 2025 and 2026.
The allegations are significant because the trades were made through perpetual futures on Hyperliquid, a decentralized derivatives platform, rather than through a conventional centralized spot exchange.
Alleged Trades Ahead of Robinhood Announcements
The charges were announced on Sept. 15, 2026. Chai is identified as being from Menlo Park, California, while Xiang is from Jersey City, New Jersey.
Prosecutors allege that their positions were based on nonpublic information they obtained while working for Robinhood. The government says the engineers knew about planned cryptocurrency listings and used that information to trade corresponding perpetual futures on Hyperliquid before Robinhood announced the listings.
The DOJ alleges that the activity breached their confidentiality obligations and was intended to generate personal profits.
U.S. Attorney Jamie McDonald said the legal restrictions applying to corporate insiders do not disappear when the trading is carried out through derivatives.
A commodities fraud conviction carries a maximum sentence of 10 years in prison, while wire fraud has a maximum penalty of 20 years.
Robinhood said it takes market integrity seriously, notified law enforcement about the matter and is cooperating with authorities.
Why Perpetual Futures Are Central to the Case
Perpetual futures allow traders to bet on cryptocurrency price movements without owning the underlying asset. Because they do not have a set expiration date, they can remain open indefinitely as long as the required funding mechanism keeps the contract aligned with the spot market.
That means a trader anticipating a potentially price-sensitive listing can establish exposure without buying the actual token or dealing with its custody.
The government is using the Commodity Exchange Act and federal wire fraud laws in the case rather than pursuing securities-fraud charges. This gives prosecutors a legal framework for addressing the alleged conduct in derivatives markets without making the legal classification of the underlying cryptocurrencies the primary issue.
The prosecution also recalls the case involving former Coinbase employee Ishan Wahi, which concerned the alleged misuse of confidential information about forthcoming token listings.
Hyperliquid has become a major venue for decentralized perpetual-futures trading and has attracted regulatory scrutiny. The Robinhood case adds a criminal enforcement component to questions surrounding trading activity on decentralized derivatives markets.
For crypto traders, the allegations illustrate that decentralized platforms do not necessarily eliminate the legal risks associated with trading on confidential information before a public announcement.
The charges remain allegations. Chai and Xiang are presumed innocent unless proven guilty, and authorities have not reported a trial date or plea.
