SMC Engineer Charged In Crypto Trading Scheme: DOJ

MENLO PARK, CA — A Menlo Park man who formally worked as an engineer for Robinhood was charged Tuesday with federal fraud after prosecutors said he used confidential company information to make cryptocurrency trades ahead of public announcements.

Hefu Chai, 36, of Menlo Park, was charged Tuesday with commodities fraud and wire fraud in connection with a scheme involving Robinhood's planned cryptocurrency listings, according to the U.S. Attorney's Office for the Southern District of New York.

Chai was formerly employed as an engineer at Robinhood and had access to nonpublic information about whether and when the company would add cryptocurrencies to its trading platform, prosecutors said.

Federal prosecutors said Chai and another former Robinhood engineer, Huaisong Xiang, used that information to trade perpetual futures tied to cryptocurrencies on Hyperliquid, a decentralized derivatives exchange.

“Robinhood takes market integrity seriously and has zero tolerance for insider trading," Thomas Koenig, a Robinhood representative, stated in an email to Patch. We have robust insider trading policies and procedures in place, including for new crypto listings. We immediately investigated and reported this matter to law enforcement and regulators, and will continue to cooperate with the investigations.”

According to the criminal complaint, the two men repeatedly purchased the cryptocurrency-linked derivatives before Robinhood publicly announced that the underlying tokens would be available for trading on Robinhood Crypto.

Prosecutors said the trades occurred between 2025 and 2026 and that each man made more than $50,000 from the trading.

More California News:

• Macaulay Culkin And ‘Schitt’s Creek’ Stars Honor Catherine O’Hara In Moving Emmys Tribute
• Man Killed In Violent McLaren Crash ID'd As South OC Cars And Coffee Founder
• 78th Emmy Awards Winners: Complete List

“Misappropriating confidential information to trade in the derivatives markets for personal benefit is illegal,” said U.S. Attorney Jamie McDonald in announcing the charges. "[The] charges make clear that 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.”

Chai is scheduled to appear Tuesday in federal court in the Northern District of California. Xiang, 30, of Jersey City, New Jersey, is scheduled to appear in Manhattan federal court.

Both men are charged with one count of violating the Commodity Exchange Act and one count of wire fraud. The commodities fraud charge carries a maximum sentence of 10 years in prison, while wire fraud carries a maximum sentence of 20 years.

The charges are accusations, and Chai and Xiang are presumed innocent unless and until proven guilty.

The FBI investigated the case, with the prosecution being handled by the U.S. Attorney's Office for the Southern District of New York's Securities and Commodities Fraud Task Force.