Federal prosecutors have charged former Robinhood Crypto engineers Hefu Chai, 36, and Huaisong “Jerry” Xiang, 30, with commodities fraud and wire fraud. Prosecutors allege the two used confidential information about planned Robinhood token listings to trade related perpetual futures on Hyperliquid before the listings were publicly announced.
According to the U.S. Attorney’s Office for the Southern District of New York, each defendant allegedly made more than $50,000 from the trades between 2025 and 2026.
The case extends beyond the alleged profits because it involves insider-trading allegations tied to a decentralized derivatives platform rather than a conventional spot exchange.
Prosecutors are relying on commodities fraud and wire fraud statutes in a case involving trading on a platform without a traditional centralized listing operation or standard KYC gatekeeper. The approach indicates that the alleged misuse of confidential corporate information can still attract criminal scrutiny even when the trading takes place through a decentralized venue.
How the Robinhood Engineers Allegedly Traded
The U.S. Attorney’s Office for the Southern District of New York announced the charges against Chai, who is from Menlo Park, California, and Xiang, who is from Jersey City, New Jersey, on Sept. 15, 2026.
According to the allegations, both engineers had access to nonpublic information concerning upcoming cryptocurrency listings at Robinhood. Prosecutors say they used that information to take positions in Hyperliquid perpetual futures before Robinhood publicly disclosed the listings.
The Justice Department alleges that the trades violated their confidentiality obligations and were carried out for personal financial gain. U.S. Attorney Jamie McDonald said corporate insiders cannot avoid legal restrictions simply by using derivatives rather than trading the underlying assets.
A commodities fraud conviction can carry a maximum prison sentence of 10 years, while wire fraud carries a maximum penalty of 20 years. Robinhood said it remains committed to market integrity, reported the matter to authorities and is cooperating with the investigation.
Why Perpetual Futures Were Used
Perpetual futures allow traders to speculate on an asset’s price without directly owning the underlying cryptocurrency. Unlike conventional futures, these contracts do not have an expiration date and use funding payments to help keep their prices aligned with the spot market.
That structure can allow traders to establish positions ahead of anticipated price-moving announcements without acquiring or holding the actual token.
The DOJ is pursuing the allegations through the Commodity Exchange Act and federal wire fraud laws rather than securities-fraud statutes. That legal strategy allows prosecutors to focus on the alleged conduct involving cryptocurrency derivatives without first resolving whether the underlying tokens qualify as securities.
The case also differs from the earlier prosecution of former Coinbase product manager Ishan Wahi, which involved allegations that confidential information about upcoming token listings was shared and used for trading.
Hyperliquid, a major decentralized venue for perpetual futures, has already attracted regulatory attention. The new case adds a criminal-enforcement dimension to scrutiny surrounding trading activity on decentralized derivatives platforms.
For traders, the allegations underscore that using decentralized derivatives markets does not necessarily remove legal exposure associated with trading on confidential information before a public listing.
The charges against Chai and Xiang are allegations, and both defendants are presumed innocent unless proven guilty in court. No trial date or plea has been reported.
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