Two Robinhood engineers charged with insider trading using Hyperliquid perpetuals

Two Robinhood HOOD$110.21·Market Closed engineers allegedly stole confidential accusation from their leader to commercialized perpetual futures connected Hyperliquid for idiosyncratic benefit, according to Jamie McDonald, U.S. Attorney for the Southern District of New York.

“Misappropriating confidential accusation to commercialized successful the derivatives markets for idiosyncratic payment is illegal,” McDonald said successful a connection connected Tuesday. “That is precisely what we allege Hefu Chai and Huaisong Xiang person done.”

The lawsuit puts trading connected decentralized derivatives platforms wrong the aforesaid enforcement model prosecutors usage for different trading based connected confidential firm information. The usage of perpetual futures did not shield the alleged trades from commodities and wire-fraud laws, prosecutors said.

McDonald alleges that betwixt 2025 and 2026, Chai, 36, and Xiang, 30, bought perpetual futures linked to crypto tokens connected Hyperliquid connected respective occasions successful beforehand of the trading platform’s nationalist announcements that the underlying assets would beryllium listed connected Robinhood Crypto. They each allegedly profited much than $50,000 from the trades, the connection said. If recovered guilty, they could look up to 10 years successful prison.

Robinhood takes marketplace integrity earnestly and has zero tolerance for insider trading,” a Robinhood spokesperson said successful an email statement. “We instantly investigated and reported this substance to instrumentality enforcement and regulators, and volition proceed to cooperate with their investigations.”

The filing against Chai and the one against Xiang assertion the 2 were designated “Coin Aware Individuals,” a radical with entree to a backstage Slack transmission containing accusation astir planned listings. Robinhood’s argumentation barred those employees from trading the tokens connected immoderate level before, and for 24 hours after, a nationalist listing announcement.

Perpetuals are derivative products that let investors to instrumentality positions connected the terms movements of an underlying integer plus without owning the plus itself. Unlike accepted futures contracts, perpetuals bash not expire and tin beryllium maintained indefinitely, and traders marque oregon person periodic backing payments to support their positions open.

The Chai ailment alleges helium traded up of astatine slightest 10 Robinhood listing announcements. The Xiang ailment alleges helium did truthful connected astatine slightest 11 occasions.

“Hefu Chai and Huaisong Xiang are charged with commodities fraud and ligament fraud for allegedly exploiting confidential concern accusation taken from their leader to commercialized perpetual futures,” said James C. Barnacle Jr., FBI adjunct manager successful charge.

Jane Street Group, 1 of Wall Street’s largest trading firms, was earlier this twelvemonth charged with insider trading by New York prosecutors. The steadfast allegedly utilized a backstage Telegram backchannel with Terraform Labs insiders to dump $192 cardinal of the TerraUSD (UST) stablecoin earlier its illness successful May 2022.