Maximum 20-year prison sentence may be faced.

Written by: Maher, Foresight News

On September 15, the United States Department of Justice unsealed two criminal complaints in the Southern District of New York (SDNY), charging former Robinhood Markets engineer Hefu Chai (36 years old, Menlo Park, California) and Huaisong Xiang (30 years old, Jersey City, New Jersey, also known as Jerry Xiang) with commodity fraud and wire fraud. The prosecution claims the two utilized undisclosed Robinhood Crypto listing information they obtained during their work to buy perpetual contracts for corresponding tokens on Hyperliquid ahead of time, each profiting over $50,000.

Chai appeared in court that day in the Northern District of California, while Xiang appeared before federal magistrate judge Ona T. Wang in the Southern District of New York. The case is handled by the SDNY Securities and Commodities Fraud Task Force, with Assistant U.S. Attorney Alexandra N. Rothman prosecuting and FBI agent Joseph Kim testifying.

After the news was announced, HOOD's stock price fell about 3% that day. A Robinhood spokesperson told multiple media outlets that the company has a zero-tolerance policy for insider trading, has established policies and procedures regarding insider trading related to new token listings, conducts internal investigations when discovered, and reports to law enforcement and regulatory agencies, continuing to cooperate with investigations. Forbes reported that Xiang's New Jersey lawyer Robert Stahl responded: “The defendants deny the charges and will vigorously defend themselves in court.” Chai has not publicly commented. Both have left the company.

Violations of Commodity Exchange Act and Wire Fraud Act

Each is charged with two counts in the complaint: violating the Commodity Exchange Act, which carries a maximum of 10 years; and wire fraud, which carries a maximum of 20 years. Sentences will be determined by a judge.

This is not the traditional "insider trading on the company’s stock." The logic of the complaint is: the listing calendar is a confidential commercial asset of the company; the two violated their confidentiality obligations to their employer; they did not front-run in the Robinhood spot market but instead went to Hyperliquid to take long positions, profiting from the opposite side.

The listing information is not even visible to all employees within the company, but only open to a small group designated as insiders. The company's "Confidential Information and Insider Trading Policy" prohibits employees from trading securities, crypto-assets, event contracts, or other financial instruments while in possession of material non-public information obtained during their employment. For insiders, trading on Robinhood or any other platform is prohibited until Robinhood publicly announces new listings or delistings, and for 24 hours thereafter.

In November 2024, both received emails indicating that due to their exposure to listing information for digital assets, “they must keep the information confidential… must not abuse their access or related knowledge, including making trades based on that non-public information.” On May 2025, a member stationed in Manhattan posted a reminder in the channel: one day until launch… the 24-hour trading ban for employees will go into effect.

Insider Details

Tokens from Robinhood typically become tradable up to an hour before a public "listing announcement" is published, during which significant price increases occur. Chai and Xiang exploited this "listing but not announced" golden time difference for precise liquidation. Hyperliquid is a decentralized derivatives exchange not approved by the U.S. CFTC, and it has geo-blocked U.S. IPs. These two former Robinhood engineers deliberately used VPNs to circumvent U.S. regulation but ultimately could not escape the law.

Chai was employed from approximately 2021 to May 2026, serving as the technical lead responsible for new digital asset listings. Xiang was employed from approximately 2024 to September 2026 as a software engineer stationed in the Manhattan office, participating in token listing-related projects.

The prosecution also included evidence in the complaint.

Chai has a crypto exchange account opened on December 17, 2017. Agents linked it to three Hyperliquid wallets:

• 0x54838fecefbc608874726bebc90ffdf1cd2dbc7b
• 0xaf1772eba267b8b85fbe7738476ead5960b83a88
• 0xf01ec38c7e3aaa447d25e6e406319a4add647191

The basis for the connection includes that from November 13, 2025, to March 15, 2026, the first wallet transferred approximately $100,000 to his named account; on December 4, 2025, the named account sent an equivalent of $5 of Ethereum to the associated wallet for a test transaction. The second and third wallets also had transactions of thousands to tens of thousands of dollars with the named account and with each other.

The targets noted in the complaint include MEW, MOODENG, as well as ASTER, XPL, HYPE, ENA, AERO, SYRUP, LDO, DOT, etc.; among them, on May 21, 2025, after receiving a Slack notification, on May 22, positions were opened for MEW and MOODENG using associated wallets, with some positions being liquidated for profit before the public announcement. Following related communications in the channel on October 9, 2025, on October 16 around 8 a.m., another associated wallet opened positions for ASTER and XPL.

Xiang's methods and details have also been meticulously recorded.

Xiang opened a named exchange account on July 23, 2022. On March 12, 2025, he transferred approximately 18 ETH to the wallet 0x8081C8c38E6196a906CDa605444d66697E8BaCf9, equivalent to about $34,000 at the time. That wallet was then used to take long positions in the corresponding tokens.

On March 10, 2025, the confidential channel reminded the company about considering the meme coin POPCAT to be listed on March 13. On March 12, he completed the aforementioned transfer of 18 ETH; on the same day, the channel confirmed the listing at 9 a.m. on March 13. On March 13, that wallet opened a long position for POPCAT and liquidated for profit after POPCAT was already tradable on Robinhood but before the company publicly announced the listing.

On May 21, 2025, the confidential channel stated that MEW and MOODENG would be listed the next day. On May 22, the same wallet opened long positions for both tokens. The MOODENG position was liquidated for profit while it was already tradable on the platform but before the announcement; the MEW long position was liquidated before the market opened and the announcement.

Notably, on March 13, 2025, a partner located outside the U.S. transferred approximately 33,395 USDC to that wallet, and this person listed Xiang as a contact on their visa application. This indicates that it is not merely "individual wrongdoing," but is highly likely to involve cross-border "conspiracy" or funded representation.

On August 1, 2025, the confidential channel stated that ONDO would be listed around August 7. On August 7, a long position was opened, again liquidating for profit when it was already tradable on the platform but before the official announcement.

On January 23, 2026, the confidential channel stated that RENDER from Render Network would be listed around January 29. On January 29, a long position was opened, also liquidating for profit before the announcement.

The complaint also indicated: between May 2025 and February 2026, that wallet had at least 10 other opportunities for misconduct.

Precedents

In July 2022, the SDNY prosecuted Coinbase product manager Ishan Wahi, his brother Nikhil Wahi, and friend Sameer Ramani, calling it "the first insider trading case in cryptocurrency." The prosecution alleged that Ishan leaked confidential information about upcoming Coinbase listings to the other two multiple times from June 2021 to April 2022, with them buying at least 25 different cryptocurrencies before at least 14 announcements, achieving approximately $1.5 million in realized and unrealized gains.

Nikhil pleaded guilty to one count of conspiracy to commit wire fraud in September 2022, was sentenced to 10 months by Judge Loretta A. Preska in January 2023, and ordered to forfeit approximately $892,500. Ishan pleaded guilty to two counts of conspiracy to commit wire fraud in February 2023 and was sentenced to two years in prison on May 9, 2023, followed by two years supervised release, and forfeited 10.97 ETH and 9,440 USDT.

Then-Southern District of New York Prosecutor Damian Williams stated: “Whether the illegal acts occur in the stock market or in the crypto asset market, this office will pursue them.” The SEC also filed civil charges against the Wahi brothers at the same time, which were later resolved through criminal forfeiture of illegal gains. Ramani has been on the run for an extended period.

The NFT market has also seen parallel cases. Former product manager Nathaniel Chastain at OpenSea was charged with using insider information about "which NFTs would be featured on the homepage" to buy in advance with an anonymous wallet and sell after being displayed on the homepage, making profits of two to five times the purchase price. In May 2023, a jury found him guilty of wire fraud and money laundering, and on August 22 of the same year, Judge Jesse Furman sentenced him to three months in prison, three months of home confinement, three years of supervised release, a $50,000 fine, and forfeited 15.98 ETH.

When looking at these three cases together, the path changes, but the enforcement agencies do not. The Coinbase case involved employees of a centralized exchange leaking the spot listing list to relatives and friends, buying tokens on the public market. The OpenSea case involved homepage recommendation information being transformed into NFT trades. The Robinhood case involved knowledgeable employees themselves taking action, transferring the listing calendar to perpetual trades on another chain.

Changing venues and contract forms does not constitute a defense.