US Prosecutors Charge Two Robinhood Engineers Over $50K Hyperliquid (HYPE) Futures Scheme

Federal Charges Over Pre-Listing Trades

Federal prosecutors in Manhattan have charged two Robinhood engineers with commodities fraud and wire fraud, alleging that each man pocketed more than $50,000 by trading perpetual futures on Hyperliquid ahead of the brokerage’s own token listing announcements. Hefu Chai, 36, and Huaisong Xiang, 30 — also known as Jerry Xiang — were named in criminal complaints unsealed on Sep. 15 by the U.S. Attorney’s Office for the Southern District of New York, which announced the charges alongside the FBI. Both men worked as engineers at Robinhood Markets during the alleged conduct, positions that exposed them to confidential information about which cryptocurrencies Robinhood Crypto planned to list and when those announcements would go live. According to the complaints, the pair used that knowledge between 2025 and 2026 to open directional derivatives positions tied to planned listings rather than buying the underlying tokens outright. Once each listing went public and the related tokens rose, both engineers allegedly closed the positions for a profit.

No Expiry, No Escape From US Law

The alleged scheme leans on a structural quirk of these contracts: unlike standard futures, perpetuals carry no expiration date and instead use recurring funding payments to keep their prices aligned with the referenced assets — a mechanism that has already produced extreme readings on the venue, including oil shorts facing a 500% annualized funding penalty. Prosecutors say that no-expiry structure let Chai and Xiang establish positions before Robinhood’s announcements and hold them until the expected price moves materialized. U.S. Attorney Jamie McDonald said the platform used for the trades does not change the legal duty: “Misappropriating confidential information to trade in the derivatives markets for personal benefit is illegal.” She added that traders cannot sidestep U.S. securities and commodities rules through perpetual futures, tokenized securities or similar products. Each defendant faces one commodities fraud count with a 10-year maximum and one wire fraud count carrying up to 20 years. Chai is scheduled to appear in the Northern District of California; Xiang is due before U.S. Magistrate Judge Ona T. Wang in Manhattan.

Hyperliquid’s Earlier Insider Trading Episode

This is not the first time the decentralized exchange has been drawn into an insider trading dispute. In December 2025, traders flagged a wallet shorting HYPE during a token unlock, and Hyperliquid publicly denied that any of its staff had traded on inside information. The company said the wallet in question belonged to a former employee dismissed in early 2024 and pointed to internal rules barring team members from trading HYPE derivatives. The current case lands on a platform whose scope has broadened well beyond its original crypto perps: HIP-3, live on mainnet since October 2025, opened perpetual market creation to outside developers, and HIP-4 followed in May 2026 with prediction and event markets. For readers new to the venue, our Hyperliquid explainer covers how the protocol records trades on public blockchain infrastructure while letting traders take positions without ever buying the referenced assets, and our How to Trade on Hyperliquid guide walks through the mechanics in practice.

HYPE Slips as the Case Lands

Market reaction has been negative but contained. HYPE traded near $77 earlier on Tuesday, down 4.5% at that point in the session, and the token has since extended the slide — spot is off 4.9% over the past 24 hours. Hyperliquid’s token ranks 11th by market value at roughly $17.1 billion. The charges arrive as Robinhood pushes deeper into on-chain finance: its Ethereum layer-2 network launched a public mainnet on July 1 with 95 tokenized stocks and wallet access in more than 120 countries, and suffered a 14-minute block-production halt this month that briefly stalled transfers and smart contract calls. The company has also rolled out perpetual futures in Europe and tokenized stock trading, and has not issued a public response to the charges. Notably, prosecutors allege no Robinhood customers lost funds and that the brokerage itself did not manipulate any token price. Readers tracking the market in real time can follow live spot and futures prices on Binance.

Decentralized Venues Enter Enforcement Reach

Taken together, the charges, the perp mechanics, the December 2025 denial and HYPE’s slide trace a single arc: a decentralized trading stack is now being tested against the obligations of traditional derivatives law. The DOJ press release we reviewed states plainly that both defendants are presumed innocent and that the complaints remain allegations, yet the government’s theory is unambiguous — venue choice does not determine legal exposure, and derivatives activity on public blockchains sits inside the reach of US commodities statutes. The open question is disclosure: prosecutors have not named every token involved in the alleged trades, and COINOTAG’s read is that the token-level detail will shape how this case lands across the wider decentralized exchange sector, where our Hyperliquid coverage tracks protocol and market developments.