On the 15th, the US federal prosecution authorities stated that two Robinhood engineers are suspected of using internal company information regarding encrypted assets and their tokenization to trade related perpetual contracts in advance on the decentralized trading platform Hyperliquid for profit, and they have been formally prosecuted.
Two employees are charged with two offenses.
The prosecution stated that the defendants are 36-year-old Hefu Chai and 30-year-old Huaisong “Jerry” Xiang. Each of them is charged with one count of commodity fraud and one count of telecommunications fraud. According to the charges, before the relevant tokens were officially launched, they took advantage of unpublicized information to establish positions and profited from price fluctuations.
Case Focus: Hyperliquid Perpetual Contracts
This case did not revolve around spot token trading, but rather focused on decentralized financial (DeFi) perpetual contracts. Perpetual contracts allow traders to bet on price fluctuations without holding the underlying assets, and typically allow for the use of leverage, with no expiration date.
The prosecution pointed out that the two defendants completed the relevant transactions on Hyperliquid. Hyperliquid is one of the major decentralized perpetual contract platforms in the crypto market and has recently attracted more regulatory attention.
The prosecution proceeds with the indictment based on the Commodity Law.
The enforcement approach taken in this case is also worth noting. This time, the US prosecution did not proceed on charges of securities fraud, but instead handled these insider trading allegations related to derivatives in accordance with the Commodity Exchange Act.
U.S. Attorney Jamie McDonald stated in a declaration that insiders of companies cannot evade securities and commodity legal regulations by trading perpetual contracts, tokenized securities, or other similar financial instruments. This stance indicates that regulatory authorities are bringing crypto derivatives trading within a clearer scope of law enforcement.
Robinhood has cooperated with the investigation.
The prosecution stated that Robinhood has cooperated with this investigation. In recent years, the company has continuously expanded its cryptocurrency business, especially in the field of decentralized finance (DeFi) smart contracts.
According to the current charges, if convicted, the maximum penalty for fraud in commerce could be 10 years in prison, and for telecommunications fraud, it could be up to 20 years in prison. The prosecution also stated that each of the two defendants profited more than $50,000 from the related transactions.
