Two Robinhood Engineers Charged Over Alleged Insider Trading on Hyperliquid

Federal prosecutors charged two Robinhood engineers with criminal charges for allegedly using insider information about upcoming crypto listings to make profits. According to the prosecutors, the engineers opened positions on Hyperliquid as they knew Robinhood was about to list certain tokens. Thus, both individuals secured gains of more than $50,000 by taking positions in the tokens before Robinhood publicly announced the listings.

How a pair of Robinhood engineers profited from insider knowledge

The latest reports reveal how insider knowledge turned into profits of more than $50,000. Two Robinhood engineers allegedly used confidential information about upcoming crypto listings on Robinhood and traded perpetual futures tied to those assets on Hyperliquid. Instead of directly using Robinhood, they used an external derivatives platform to execute the trades.

What is more interesting is that these engineers are now facing criminal charges from Federal prosecutors in Manhattan. The prosecutors accuse the engineers of using insider knowledge about Robinhood’s potential token listings to place trades and make profits.  As noted by the prosecutors, Hefu Chai and Huaisong Xiang already knew the tokens Robinhood planned to list. Using this non-public information, the two opened perpetual futures positions on Hyperliquid between 2025 and 2026.

Profiting with perpetual futures

Unlike usual trades, perpetual futures allow traders to place bets on an asset’s price without actually owning it. They also do not have a fixed expiration date. Thus, the positions can remain open for a long time. When the token price moves in the direction the traders anticipate, the positions could generate a profit.

This made the trade possible, according to the prosecutors. As perpetual futures do not have an expiry date, Chai and Xiang were able to open their positions before Robinhood announced the listings and keep them open until the price moved accordingly.

Notably, the alleged activity happened on Hyperliquid. While trades on Hyperliquid are recorded on public infrastructure, traders do not need to directly hold or buy the asset for perpetual contracts. Thus, the engineers are likely to have taken the positions without purchasing the token.

In this context, it is important to note that Hyperliquid has been expanding beyond crypto with its HIP-3 upgrade. This enabled outside developers to create perpetual markets linked to stocks, commodities, and indexes. Later, HIP-4 added prediction and event markets. Thus, these updates enhanced the platform’s role in decentralized derivatives trading. It also added more compliance challenges when trades involve insider knowledge from another company.

But, as per the prosecutors’ statement, the use of Hyperliquid does not change the legal obligations of using insider knowledge. US Attorney Jamie McDonald stated, “Misappropriating confidential information to trade in the derivatives markets for personal benefit is illegal.”

What penalties could the Robinhood engineers face?

Reportedly, Chai and Xiang each could face one count of commodities fraud and one count of wire fraud. The commodities fraud charge carries a maximum prison sentence of 10 years, while the wire fraud charge could carry up to 20 years in prison.

Nonetheless, these are possibilities, not confirmations. It doesn’t mean that the engineers will definitely face these years in prison for the charges. The sentence, if any, would be decided by the federal judge after considering the US Sentencing Guidelines and other factors.