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Some information is meant to sit locked in a company's back rooms, invisible until the moment it's officially announced. Two Robinhood Markets engineers allegedly decided that lock wasn't worth respecting. Federal prosecutors in New York announced Tuesday that Hefu Chai and Huaisong "Jerry" Xiang each pocketed more than $50,000 by unlawfully trading futures on the decentralized derivative exchange Hyperliquid — using confidential information they gained while working at the California-based discount brokerage.

The Defendants and Their Charges

Chai, 36, of Menlo Park, California, and Xiang, 30, of Jersey City, New Jersey, face separate criminal complaints charging them with commodities fraud and wire fraud. According to the complaints, both men are no longer employed by Robinhood. Chai was scheduled to appear in federal court in California on Tuesday, while Xiang was set to appear in federal court in Manhattan — two coasts, two courtrooms, one shared set of allegations.

Prosecutors Draw a Hard Line

U.S. Attorney Jamie McDonald for the Southern District of New York didn't mince words about what the pair allegedly did, describing their scheme as trading company secrets for personal financial gain on a derivatives platform. "Corporate insiders cannot evade the securities and commodities laws by trading based on misappropriated information in derivatives like perpetual futures, tokenized securities, or other similar financial instruments," McDonald said — a statement that reads like a warning shot aimed well beyond just these two defendants.

How the Alleged Scheme Worked

According to prosecutors, starting last year, Chai and Xiang bought futures tied to specific cryptocurrency tokens on Hyperliquid — notably, a crypto trading service that actually competes with Robinhood — timing their purchases just ahead of Robinhood's own announcements that those underlying tokens would be listed on its platform. It's a bit like betting on a horse race after already knowing which horse crosses the finish line first.

Why the Timing Mattered So Much

The complaints spell out exactly why this information carried real financial weight: "Because of the size and popularity of Robinhood's platform, the listing of a particular digital asset on Robinhood can create upward price pressure." In other words, knowing which token was about to get a Robinhood spotlight meant knowing, with unusual confidence, which price was about to climb.

A Clear-Cut Prohibition, Allegedly Ignored

Given their access to confidential details about which tokens Robinhood planned to recognize, both men were, according to prosecutors, "strictly prohibited" from trading based on that material nonpublic information. Yet the complaints allege they did exactly that, profiting from trades involving crypto offerings including Mew and Moodeng ahead of Robinhood's public announcements that it would list them — allegations the government lays out in granular, transaction-by-transaction detail.

The Defense Pushes Back

Xiang's attorney, Bob Stahl, disputed the allegations on his client's behalf. "We will vigorously defend this matter in court," Stahl told Law360 by email, signaling that this case is far from a foregone conclusion.

Robinhood Distances Itself From the Alleged Conduct

Robinhood itself moved quickly to separate the company from its former employees' alleged actions. Communications manager Rouky Diallo said in a statement that Robinhood maintains "zero tolerance" for insider trading. "We immediately investigated and reported this matter to law enforcement and regulators, and will continue to cooperate with their investigations," the statement added — positioning the company as a cooperating witness rather than a target of the probe.

The Legal Teams Involved

Xiang is represented by Bob Stahl of Stahl Gasiorowski Criminal Defense Lawyers PC. Counsel information for Chai was not immediately available.

The government's case is being handled by Alexandra Rothman of the U.S. Attorney's Office for the Southern District of New York.

In an industry where crypto markets can swing wildly on a single announcement, this case serves as a pointed reminder that even in the freewheeling world of decentralized finance, the old rules about insider information still very much apply — and prosecutors appear determined to enforce them.