Federal authorities have formally accused two Robinhood software engineers, Hefu Chai and Huaisong Xiang, of wire and commodities fraud, stating they leveraged inside details regarding scheduled cryptocurrency listings to execute perpetual futures trades on Hyperliquid.
According to prosecutors, Chai opened positions ahead of a minimum of 10 listing disclosures, while Xiang did the same prior to at least 11 disclosures, with both individuals accumulating profits exceeding $50,000 across the 2025 to 2026 timeframe.
This legal action demonstrates that executing derivatives contracts on decentralized networks remains fully governed by federal fraud statutes, carrying potential prison sentences of up to 10 years for each accused party if a conviction is secured.
According to Jamie McDonald, U.S. Attorney for the Southern District of New York, a pair of Robinhood HOOD$119.83·Market Closed professionals illicitly extracted proprietary data from their company to trade perpetual contracts on Hyperliquid for personal gain.
McDonald remarked during a Tuesday announcement via an official statement that utilizing confidential data for personal enrichment within derivatives markets is unlawful, which is precisely the behavior attributed to Hefu Chai and Huaisong Xiang.
This enforcement action integrates trading activity on decentralized derivatives platforms directly into the standard regulatory enforcement paradigm applied by legal authorities toward confidential corporate data exploitation, confirming that perpetual futures offer no exemption from wire and commodities fraud statutes.
McDonald noted that between the years 2025 and 2026, 36-year-old Chai and 30-year-old Xiang repeatedly acquired cryptocurrency token-backed perpetual futures via Hyperliquid prior to public declarations by the platform indicating those specific underlying assets would soon join the Robinhood Crypto catalog, netting upwards of $50,000 each in alleged gains that could carry a maximum 10-year prison sentence upon conviction.
A representative for Robinhood shared via email that the organization maintains zero tolerance for insider trading and treats market integrity with utmost seriousness, having promptly investigated, notified law enforcement and regulatory bodies, and committed to sustaining ongoing cooperation with their inquiries.
Documentation associated with the legal complaint against Chai alongside the filing targeting Xiang indicates that both developers held status as “Coin Aware Individuals,” granting them clearance within a restricted Slack channel housing upcoming listing schedules, while corporate rules strictly prohibited such workers from trading those tokens anywhere prior to or within 24 hours following any official public release.
Perpetual contracts function as derivative instruments empowering market participants to speculate on price trajectories belonging to underlying digital assets devoid of actual ownership, differing from traditional futures by lacking expiration dates and remaining active indefinitely through periodic funding settlements exchanged among participants to sustain open positions.
The paperwork concerning Chai asserts he initiated trades preceding a minimum of 10 rollout announcements by Robinhood, whereas the filing involving Xiang maintains he executed identical actions across no fewer than 11 instances.
Assistant FBI Director in Charge James C. Barnacle Jr. stated that Hefu Chai and Huaisong Xiang face formal accusations encompassing commodities fraud and wire fraud stemming from the alleged misuse of proprietary corporate information acquired from their employer to speculate on perpetual futures.
UPDATE (Sept. 16, 2026 at 15:00): Removes reference to New York prosecutors charging Jane Street. The allegations originate from a civil lawsuit brought by Terraform Labs’ court-appointed bankruptcy administrator, not criminal authorities.
Originally published at https://www.coindesk.com/business/2026/09/16/two-robinhood-engineers-charged-with-insider-trading-using-hyperliquid-perpetuals.
