The U.S. Congress is still discussing "where the regulatory boundaries lie," but the DOJ and FBI have already conducted a retroactive analysis along a perpetual contract transaction on-chain.

By: Fugui

On September 15, 2026, two landmark events emerged simultaneously in the legislative and law enforcement sectors of the U.S. cryptocurrency field. Although there was no direct causal relationship between the two, they collectively outline the current true state of industry regulation. On that day, the U.S. Senate failed to pass a cloture motion on H.R.3633, the Digital Asset Market Clarity Act, with a vote of 49 in favor and 50 against, thus the bill did not proceed to the next stage of deliberation, and the long-awaited codified market structure framework has yet to be established. On the same day, the U.S. Department of Justice (DOJ), through the Southern District of New York U.S. Attorney's Office, announced that a Manhattan federal court unsealed two criminal complaints filed by FBI agents and brought federal criminal charges against two former Robinhood engineers. The defendants are 36-year-old Hefu Chai and 30-year-old Huaisong "Jerry" Xiang. The prosecution alleges that the two obtained non-public information about cryptocurrency listings through their positions, established positions in perpetual contracts on the decentralized derivatives exchange Hyperliquid ahead of the public announcements of the relevant tokens on Robinhood, and profited by closing their positions around the time Robinhood publicly announced the listings, with each of their illegal gains exceeding $50,000. According to the criminal complaints, both are charged with one count of commodity fraud under the Commodity Exchange Act and one count of federal wire fraud, with the former carrying a maximum sentence of 10 years in prison and the latter, 20 years.

This case is not the first insider trading criminal charge in the cryptocurrency field, but its uniqueness lies in the fact that the transactions occurred entirely on a decentralized derivatives platform. The prosecution formed a chain of evidence sufficient to support the current charges through internal communication records and cross-verification with on-chain data, clearly demonstrating the pseudo-anonymity nature of on-chain transactions and the exploration of existing federal anti-fraud laws' applicability to new market behaviors.

Two Narratives on the Source of Case Clues

Regarding the trajectory of this case, there are clear discrepancies in the publicly available information, requiring strict differentiation based on primary materials, and they should not be confused.

Most third-party media describe the incident's logic as follows: Robinhood's internal risk control system actively detected abnormal transactions and subsequently reported it to regulatory authorities. The official statement released by Robinhood reads:

"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."

This statement only proves that the company initiated an investigation after discovering suspicious circumstances and reported it to law enforcement and regulatory authorities; it does not mention specific triggering mechanisms such as "risk control system automatically alarming" or "internal monitoring system first detecting on-chain anomalies."

In contrast, the criminal complaint publicly released by the DOJ, signed by FBI agent Joseph Kim, states that the evidence sources are based on a review of documents provided by Robinhood, conversations with law enforcement personnel and a Robinhood employee, publicly available trading data from the Hyperliquid platform, and records provided by cryptocurrency companies. The DOJ's official press release also merely expresses gratitude for Robinhood's cooperation with the investigation. The facts that these publicly available primary materials can confirm are: Robinhood initiated an internal investigation after discovering that employees might have exploited confidential listing information for profit and cooperated throughout the investigation by federal law enforcement; currently, there are no publicly available official documents confirming the claim that "the internal risk control system automatically captured trading anomalies and triggered alerts," so media reports' inferences cannot be definitively recorded as established facts. The lack of clear disclosure regarding the initial triggering mechanism in official documents may also reflect the judicial authorities' cautious protection of internal whistleblowers and sensitive investigative means.

The DOJ's public complaint does not include on-chain community monitoring as a source of case clues and does not disclose whether external researchers' tracking triggered the initial investigation. Notably, after the case was made public, some media reported that anonymous on-chain researcher Astra Trades had been tracking abnormal transactions on Hyperliquid highly coinciding with Robinhood's listing time as early as 2025 and publicly marked related associated wallet addresses. Whether community monitoring participated in the initial discovery of the case cannot be confirmed from the public materials.

Combining the facts that can be verified from the current public information: the two defendants, as employees who had access to confidential information about upcoming listings, were explicitly classified as "Coin Aware Individuals" by the company, prohibiting them from trading related tokens and restricting them from participating in corresponding trading for 24 hours after the listing announcement. These confidentiality requirements were communicated multiple times through internal channels: Xiang signed for a confidentiality obligation notification email in November 2024, and the prohibition on trading for 24 hours before a listing was reiterated in internal communications in May 2025. Under the clear institutional notification premise, the timing patterns of the related trading behaviors corresponded with the employees' authorized privileges, leading the company to initiate an internal investigation after discovering anomalies and transferring related materials to law enforcement. Once the FBI intervened, through cross-verifying internal communication records and on-chain trading data, an evidence basis supporting the current allegations was ultimately formed.

Paths of Information Acquisition and Trading Operations

The trading patterns of the two defendants are highly similar, primarily relying on utilizing non-public listing information obtained through their work to establish corresponding perpetual contract positions in advance and profiting from the time difference of the information.

Robinhood, as a large retail trading platform in the U.S., may generate new market demand and price-raising pressure when its tokens are listed. The criminal complaint states that the two were able to access Robinhood's internal token listing information due to their work responsibilities and were accused of establishing corresponding token perpetual contract positions on Hyperliquid before the relevant public announcements were made.

The complaint describes Hyperliquid as a decentralized derivatives trading platform and points out that at that time the platform did not have approval from the U.S. Commodity Futures Trading Commission (CFTC) to operate a futures contract market while implementing geo-blocking for U.S. IP addresses. An FBI agent stated in the complaint that the relevant geographic restrictions could be bypassed using a VPN, but the complaint did not claim that the two defendants actually used a VPN to access Hyperliquid. The basis for the investigation disclosed in the complaint includes documents provided by Robinhood, conversations with internal employees and other law enforcement personnel, Hyperliquid's public trading information, and records of cryptocurrency companies.

The specific trading process displays a highly similar pattern: the defendants first learned of a certain token's listing plan and time through an internal Slack channel, then transferred funds from their centralized exchange accounts to Hyperliquid-associated wallets, and established corresponding long positions in perpetual contracts using those wallets. It is noteworthy that their closing timings did not all occur after the official listing announcements. The complaint states that some digital assets on Robinhood typically open for trading up to approximately one hour before the public announcement, enabling the defendants to close their positions for profit within the time window when the asset was already open for trading but Robinhood had not yet officially released the announcement.

For example, in Xiang's first transaction involved in the case, on March 10, 2025, he learned from the Robinhood internal Slack channel that the company was considering listing POPCAT on March 13; on March 12, approximately 18 ETH was transferred from his cryptocurrency exchange account to the Hyperliquid wallet 0x8081 associated with him. On the same day, he received a Slack message informing him that Robinhood planned to list POPCAT at 9 AM on March 13. On March 13, Xiang created a long position for POPCAT perpetual contracts on Hyperliquid using that wallet; when POPCAT had already opened for trading on Robinhood but the official announcement had yet to be released, he closed his position and made a profit. The complaint states that apart from this transaction, the wallet was also used in at least 10 other transactions to trade perpetual contracts before Robinhood publicly announced the relevant token listings, involving tokens like MEW, MOODENG, ONDO, and RENDER.

Chai's trading pattern is essentially the same. The complaint states that he had at least 10 instances of establishing corresponding long positions in perpetual contracts on Hyperliquid before Robinhood publicly announced related tokens, involving tokens like MEW, MOODENG, ASTER, XPL, HYPE, ENA, AERO, SYRUP, LDO, and LIT. On October 16, 2025, Chai learned via an internal Slack channel that Robinhood planned to list HYPE on October 23; on October 23, he created a long position for HYPE perpetual contracts using an associated wallet on Hyperliquid. He closed his position and made a profit after HYPE opened for trading on Robinhood but before the official announcement was published.

The on-chain wallets used by both defendants are not completely severed from their real identities. The complaint reveals that the relevant wallets had financial transactions with the defendants' centralized exchange accounts, and investigators linked these wallets to the defendants' identities and related transactions based on this.

Evidence Logic of On-Chain Tracking and Sentence Analysis

Blockchain networks provide pseudonymity rather than complete anonymity: on-chain addresses typically do not directly reveal real identities, but transaction activities continuously leave publicly verifiable on-chain records. Once a certain address can be associated with customer identity information, deposit and withdrawal records from centralized exchanges, or other off-chain information, the transaction history of that address may become essential evidence for identifying the transaction entity and reconstructing the transaction activities.

On-chain addresses themselves do not directly disclose identities, but centralized exchanges usually implement customer identification based on the jurisdiction and business type, retaining records of account identities, deposits, and withdrawals. When funds are transferred from a real-name or identifiable exchange account to an on-chain wallet and then participate in transactions through that wallet, relevant transfers and transaction activities will leave verifiable records on the blockchain, including transaction times, asset quantities, related addresses, and fund flows. Compared to investigations in traditional financial markets that require separately retrieving communication records, bank statements, brokerage trading data, and combining witness testimonies, publicly available on-chain data provides an independently verifiable transaction timeline and also conditions for cross-referencing on-chain and off-chain data.

The evidence structure presented in the public materials of this case relies not solely on on-chain data but integrates multiple types of information for mutual verification. The complaint shows that FBI agents reviewed internal documents provided by Robinhood, conducted conversations with law enforcement personnel as well as Robinhood employees, and referenced trading information from Hyperliquid and related records from cryptocurrency companies. Thus, investigators can correlate the time when the defendants accessed non-public listing information at Robinhood with the fund transfers and transaction activities of the relevant on-chain wallets. In other words, while on-chain addresses themselves do not equal real identities, when associated with internal company records, centralized exchange accounts, and fund flows, the anonymity space brought by multi-address operations is significantly reduced.

It is noteworthy that the prosecution did not frame the case's overall characterization as "whether the involved tokens belong to securities or commodities," but explicitly charged two types of anti-fraud offenses: first, a commodity fraud charge under the Commodity Exchange Act (CEA), asserting that the defendants defrauded while trading perpetual contracts on Hyperliquid using non-public information; second, a federal wire fraud charge, alleging that the defendants utilized interstate or international communication facilities to engage in related fraudulent activities. The DOJ also clearly described the involved transactions as perpetual contract trading on Hyperliquid, stating that the platform was not approved by the CFTC to operate a futures contract market at the time.

Regarding the widely circulated claim of "up to 30 years of imprisonment," it is important to clarify the legal boundaries: this number is simply the theoretical cap resulting from the straightforward addition of the maximum statutory sentences for two charges - commodity fraud with a maximum of 10 years and wire fraud with a maximum of 20 years - and does not mean that the defendants will inevitably face a 30-year sentence. The DOJ specifically pointed out that any actual sentencing will be determined by the judge.

The previous Coinbase insider trading case can serve as a historical reference. In 2023, Nikhil Wahi was sentenced to 10 months in prison for trading based on non-public cryptocurrency listing information obtained from his brother, who was then a Coinbase employee; his brother Ishan Wahi was handled in a separate case. However, this case is still in the criminal charge phase, with both defendants not yet convicted, and currently there are no publicly available sentencing guideline calculation results, hence cannot merely use previous cases' sentences to infer the final penalty for this case.

If ultimately convicted, the two will face federal criminal convictions and corresponding long-term legal and professional impacts.

Comparison and Evolution of Similar Cases

This case is the third highly publicized criminal lawsuit filed at the federal level against insider trading in the cryptocurrency field, with the progress of all three cases clearly showing the prosecution's ongoing attempt to apply existing anti-fraud laws to new behavior involving digital assets. This process is not a linear "regulatory expansion," but rather accompanies controversies, adjustments, and boundary calibrations regarding legal applicability.

In June 2022, the DOJ criminally charged Nathaniel Chastain, a former product manager at OpenSea, marking the first attempt at the federal level to apply wire fraud theory to information profiteering behavior in the digital asset realm. Chastain was responsible for selecting the NFTs recommended on OpenSea's homepage, using advance knowledge of the recommendation list to preemptively purchase the corresponding NFTs, then selling them for profit after the homepage recommendation was published, with trading occurring between June and September 2021, totaling 45 NFTs and illegal profits of around $50,000. The case's clue was triggered by public discussions in the community regarding abnormal trading behaviors; after the DOJ intervened, evidence was secured through on-chain address associations and cross-verification with OpenSea's internal records. In May 2023, the jury found him guilty of wire fraud and money laundering, leading to a 3-month prison sentence plus 3 months of home confinement and a fine of $50,000, along with the forfeiture of approximately 15.98 ETH. However, this first-instance ruling did not create a binding legal precedent: in July 2025, the U.S. Second Circuit Court of Appeals completely vacated the conviction, primarily on the grounds of errors in jury instructions and the lack of sufficient commercial value of OpenSea's homepage recommendation information regarding the CFTC's "property" requirement; in January 2026, the prosecution decided against retrial, ending the case through a deferred prosecution agreement. The outcome of this case clearly indicates that the applicability of wire fraud provisions in the digital asset domain is not without limits; it cannot lead to a conviction solely based on "dishonest" behavior, and must satisfy the legal requirements stipulated.

The case that resulted in a valid guilty verdict was started in July of the same year, when the DOJ charged Ishan Wahi, the former product manager at Coinbase, along with his brother Nikhil Wahi and their friend Sameer Ramani, marking the second criminal case of insider trading in cryptocurrency. Wahi, responsible for the token listing work at Coinbase, gained advance knowledge of the token listing list and leaked this information to his accomplices, who subsequently bought the corresponding tokens on-chain for profit, completing at least 14 transactions for illegal profits of about $1.5 million. The discovery chain for this case is completely public and transparent: on April 12, 2022, well-known Twitter account @Cobie publicly posted that a certain Ethereum wallet had precisely bought unique low-market-value tokens from the Coinbase listing list about 24 hours before it was announced, exhibiting a clearly abnormal trading pattern. Following this post, extensive discussions erupted within the cryptocurrency community; Coinbase immediately responded stating they had initiated an internal investigation, which weeks later publicly confirmed that the leaking employee had been immediately terminated and transferred to relevant law enforcement authorities. In February 2023, Ishan Wahi pleaded guilty to two counts of conspiracy wire fraud, sentenced to 24 months in prison in May of the same year, while his brother was sentenced to 10 months concurrently; Ramani remains at large. Concurrently, in the civil lawsuit filed by the SEC against the three, both parties eventually reached a settlement, with the SEC not requiring the defendants to admit that the tokens involved were securities, reflecting the long-standing struggle for regulatory jurisdiction in the cryptocurrency field. It should be noted that Ishan Wahi's sentence was a plea deal and not subjected to a complete jury trial and appellate court review, hence it does not constitute a binding judicial precedent, but this case clearly demonstrated that the DOJ could pursue accountability for behavior exploiting confidential listing information without directly relying on securities insider trading provisions using wire fraud theory.

The current Robinhood case further extends the enforcement applicability boundaries laid on previous explorations. Compared to the Homepage recommendation information in the OpenSea case, which had commercial value disputes, the listing announcements on the Robinhood platform directly influence token trading volumes and platform user profits, holding explicit commercial value, allowing the prosecution to apply both commodity fraud provisions of the Commodity Exchange Act and wire fraud provisions simultaneously, thus yielding a more diverse legal applicability path than the previous cases relying solely on wire fraud, with stronger legal foundations. From the clue discovery perspective, this case did not have the prior trigger stage of community public exposure similar to the Coinbase case; rather, the investigation was carried out after the internal company scrutiny while cooperating with law enforcement, and the triggering mechanism for the clue has not been completely disclosed; from the traded subjects view, it extends from NFT and spot tokens to derivative perpetual contracts; from the trading venues' perspective, it progresses from centralized NFT platforms and on-chain spot trading to decentralized derivatives exchanges with geographical blocking; and from behavioral models, it evolves from the earlier tipper-tippee model of leaking information to third-party trades, to the direct market participation of individuals knowledgeable about insider information, eliminating the evidentiary costs of the information relay phase. The core logic of the three cases remains consistent: whether regarding NFTs, spot tokens, or perpetual contracts, whether on centralized or decentralized platforms, individuals leveraging confidential commercial information obtained through their roles for personal profit essentially meet the core characteristics of fraudulent behavior. However, whether such behavior can lead to conviction and what charges can be applied still need to strictly align with the established legal requirements.

Regulatory Trends and Industry Implications in the U.S.

The inability to advance the CLARITY Act in the U.S. Congress does not imply a relaxation of law enforcement in the cryptocurrency domain; however, it cannot be simply interpreted as "increased law enforcement under legislative stagnation" - these are essentially two parallel logical lines. The slow legislative process in the U.S. Congress stems from a prolonged struggle among various stakeholders over the overall rules of the industry, with the core objective being to delineate clear regulatory boundaries and clarify the jurisdiction of different agencies; meanwhile, law enforcement actions do not need to wait for an entirely new piece of specialized legislation to be introduced, as long as actions align with the requirements of existing anti-fraud laws, criminal accountability can be initiated. Even if the OpenSea case was ultimately dismissed due to insufficient legal requirements, the DOJ has not ceased exploring the applicability of anti-fraud provisions in the cryptocurrency field, as evidenced by the effective judgment in the Coinbase case and the progress of the current case. Regardless of how the technological forms evolve - whether it is DeFi, DEX, or perpetual contracts - as long as the essence of the behavior is exploiting non-public information to commit fraud, undermining market fairness, there exists applicability within the current legal framework; however, whether specific charges can receive court support still needs to undergo strict judicial scrutiny.

The previously held perceptions within the industry such as "decentralized platforms lack regulation" and "on-chain addresses being anonymous cannot be held accountable" fundamentally misunderstand both technological characteristics and legal boundaries. The pseudonymity of blockchain indeed does not directly expose user identities, yet the openness and immutability of on-chain data, combined with centralized exchange KYC requirements, internal communication records, and timestamp cross-referencing technology, can already form a complete evidence loop. As long as the information originates from entities within the U.S., the actor is located within the U.S., and the flow of funds passes through compliant financial infrastructure in the U.S., even if trading occurs on platforms registered abroad and lacking U.S. regulatory licenses, they may still fall within the jurisdiction of U.S. law enforcement. Of course, this does not mean there are no regulatory gray areas; the innovations in technological forms will invariably introduce new challenges to the application of existing laws. The ruling in the OpenSea case has clearly delineated the applicability boundaries of the law, and each prosecutorial allegation does not necessarily correspond to a final guilty conclusion.

The timeline of the advancement of the three cases and the expansion of law enforcement scope clearly illustrate the normalization trend of law enforcement in the U.S. cryptocurrency sector. From NFTs to spot tokens to perpetual contracts, from centralized to decentralized platforms, the prosecution continually tries to apply existing laws to new trading scenarios, but this process is always accompanied by legal boundaries calibration, without an absolute "regulatory no-dead-angle." Following this prosecution, internal compliance standards in the U.S. cryptocurrency industry will tighten further. Previously, the internal compliance of most platforms only monitored employee transactions on their own platforms; in the future, monitoring will gradually expand to multi-platform monitoring of employees' related on-chain addresses, DEX trading tracking, and identifying abnormal transactions precisely matched with platform announcement events. Meanwhile, participants in various communities disseminating so-called "insider information" will also face higher legal risks, with the traceability of fund flows continuously lowering the matching costs of information dissemination and trading activities.

Technological iteration can change the venues, subjects, and forms of trading, but the fundamental rules governing market operation will not automatically become ineffective due to changes in the technological medium. The prohibition of utilizing non-public information for profit in capital markets originates from the underlying maintenance of market fairness; this principle will not change just because transactions have shifted from traditional securities exchanges to on-chain platforms. The public and transparent features of blockchain essentially provide law enforcement agencies with a more complete and harder-to-tamper source of evidence rather than a natural haven for wrongdoers. While the legislative process may be delayed due to interest struggles, and law enforcement exploration will adjust due to legal requirements' constraints, every transaction's traces left on-chain are permanent. Legislative decisions determine where regulatory boundaries are established, while law enforcement decisions determine how far the existing boundaries can extend; what blockchain does is retain a complete record of all paths taken.