Former Robinhood Engineers Charged Over Pre-Listing Crypto Perpetuals Trades

Inside Information in the Perpetuals Market

The U.S. Department of Justice has brought federal charges against two former Robinhood employees for allegedly exploiting advance knowledge of cryptocurrency listings to profit from trades on decentralized derivatives platforms. Hefu Chai and Huaisong “Jerry” Xiang face allegations of commodities fraud and wire fraud, with prosecutors claiming each defendant generated more than $50,000 in profits through illicit perpetuals trading conducted between 2025 and 2026. The case represents a significant expansion of insider-trading enforcement into the realm of decentralized derivatives, showing regulators’ determination to pursue market abuse wherever it occurs in the crypto ecosystem.

Access and Alleged Execution

Chai held the position of technical lead responsible for digital-asset listings at Robinhood beginning around 2021, serving in that capacity until his departure in May 2026. Xiang joined Robinhood circa 2024 as a software engineer with direct involvement in cryptocurrency listing processes. Both individuals received special designations as “Coin Aware Individuals,” providing them with access to a restricted Slack channel where listing dates and related strategic information circulated among a limited team. Robinhood’s internal policies explicitly prohibited these employees from executing trades on any platform—including external exchanges—within 24 hours of listing announcements.

According to prosecutors, both engineers circumvented these compliance measures by placing long positions on Hyperliquid perpetuals contracts ahead of tokens’ debuts on Robinhood’s trading platform. Chai allegedly established such positions before at least ten different listing announcements spanning tokens such as Cat in a dogs world (MEW), Moo Deng (MOODENG), Aster (ASTER), Plasma (XPL), Hyperliquid (HYPE), Ethena (ENA), and Aerodrome Finance (AERO). The alleged trades followed a consistent pattern: positioning before public announcement and closing positions after value appreciation following the listing. Xiang’s activities began with Popcat (POPCAT) perpetuals trades in March 2025, after which he allegedly repeated this approach across at least ten subsequent listing events.

Expanding the Frontier of Regulation

Each defendant confronts one count under the Commodity Exchange Act, which carries a maximum prison sentence of ten years, plus one count of wire fraud, potentially resulting in up to twenty years of incarceration. U.S. Attorney Jamie McDonald stated that corporate insiders cannot evade commodities and securities laws by routing trades through perpetual futures, tokenized securities, or similar instruments—a clear message that regulatory jurisdiction extends across market structure variations.

This enforcement mirrors elements of a 2023 insider-trading prosecution at Coinbase, yet distinguishes itself by targeting derivatives rather than spot asset purchases. The charges signal regulatory willingness to pursue information abuse at the intersection of centralized platforms and decentralized trading venues, a critical frontier as crypto derivatives markets continue expanding. Both individuals remain presumed innocent unless and until convicted in court.

This case demonstrates that as crypto markets mature, regulatory oversight follows, making insider trading an increasingly dangerous game regardless of market venue.

Source: U.S. Department of Justice, via Cointelegraph. Not financial advice.