Robinhood Shares Drop on Insider Trading Charges Against Ex-Employees

Robinhood shares dropped over 5% after two former employees faced charges for alleged fraudulent cryptocurrency trading. The Justice Department accused Hefu Chai, 36, and Huaisong Xiang, 30, of earning more than $50,000 each by trading on confidential information about upcoming token launches. Prosecutors claim the pair used insider knowledge to trade perpetual futures, generating profits on memecoins and the decentralized exchange Hyperliquid.

Both employees were designated as Coin Aware Individuals at Robinhood, a role that restricted their trading activities around new cryptocurrency listings and delistings. Despite these restrictions, prosecutors allege they exploited their access to trade on Robinhood and other platforms. Robinhood confirmed it investigated the matter and reported it to regulators, emphasizing its zero-tolerance policy for insider trading.

Xiang’s attorney denied the charges, while Robinhood asserted its commitment to market integrity and continued cooperation with authorities. The company’s stock fell to a two-week low of $104.59, marking a 6.7% decline since the start of the year. The charges come amid prior convictions in similar cryptocurrency trading cases, though these do not impact the current allegations.