Robinhood, Hyperliquid, and Commodities Fraud: Inside the SDNY Insider Trading Complaints
On September 15, 2026, the U.S. Attorney’s Office for the Southern District of New York unsealed two criminal complaints against former Robinhood engineers. Hefu Chai, 36, of Menlo Park, California, and Huaisong Xiang, 30, of Jersey City, New Jersey, are each charged with one count of commodities fraud and one count of wire fraud. The government alleges they learned which cryptocurrency tokens Robinhood Crypto was about to list, then bought perpetual futures on those tokens on Hyperliquid, a decentralized derivatives exchange, before the listings were announced. Each complaint alleges illicit profits of more than $50,000. See the Justice Department’s announcement of the charges.
No token was charged as a security. The venue where the trades occurred holds no CFTC registration and blocks U.S. addresses. The government charged under the Commodity Exchange Act and the federal wire fraud statute instead. Most of what can be litigated here follows from that choice.
Why These Complaints Landed Now
Federal enforcement in digital assets has shifted. The SEC has stepped back from most token litigation, and the Justice Department narrowed its own charging policy in April 2025. Prosecutors now reach for the Commodity Exchange Act when a derivative is involved and for wire fraud when information was taken. Neither theory requires anyone to decide whether a token is a security.
The Commodity Futures Trading Commission has been signaling this for a year. Its Division of Enforcement issued an advisory in 2026 warning that misappropriation of confidential information in breach of a pre-existing duty violates Section 6(c)(1) of the Act and Regulation 180.1, and the Division’s director said publicly in March 2026 that the agency is monitoring derivatives venues for exactly that conduct. See the CFTC Enforcement Division advisory on prediction markets and insider trading. SDNY’s press statement made the same point in blunter terms, warning that corporate insiders cannot avoid the securities and commodities laws by trading derivatives such as perpetual futures or tokenized securities.
Robinhood detected the trading, investigated it, and reported it to law enforcement and regulators. That sequence shows in the affidavits. Both rest on documents the company produced, its Slack records, its written insider trading policy, and conversations with a Robinhood employee. The government started with the internal record already assembled.
The reach goes past these two defendants. Every exchange, brokerage, and listing venue keeps some restricted channel of pre-launch information. These affidavits show what such a channel looks like once it lands in a federal court filing, and what happens to the people who had access to it.
What the Complaints Allege
The Information and the Access Controls
Robinhood Crypto does not support every digital asset. Only tokens the company lists can be traded on the platform. According to both complaints, Robinhood restricted knowledge of upcoming listings to a group of employees it called “Coin Aware Individuals,” who were given access to a private Slack channel whose description identified it as a confidential channel for coin listings covering planning, readiness, and launch. Chai was a technical lead responsible for listing new digital assets from roughly 2021 until May 2026. Xiang was a software engineer on the same work from roughly 2024 until September 2026, based out of Robinhood’s Manhattan office. Both were designated Coin Aware Individuals.
The complaints plead notice four different ways. Robinhood maintained a written Confidential Information and Insider Trading Policy barring employees from trading securities, crypto-assets, event contracts, or other financial instruments while holding material nonpublic information from their employment. The policy separately provided that Coin Aware Individuals were strictly prohibited from trading on Robinhood or any other platform before and during the 24 hours after a public listing or delisting announcement. In November 2024, each defendant received an email telling him it was imperative to keep listing information confidential and to refrain from buying or selling an asset based on it. In May 2025, a Manhattan-based colleague messaged the channel that the team was one day from launch and that the 24-hour employee trading halt would be in place.
That is deliberate. Instead of asking a jury to infer a duty from the employment relationship, the government pleaded a written rule, delivered to each defendant by name, that describes the charged conduct almost word for word.
The Trading
Xiang’s complaint anchors on POPCAT. On March 10, 2025, he allegedly received a Slack message that Robinhood was considering listing the token on March 13. On March 12, he allegedly moved roughly 18 Ethereum, worth about $34,000, from an exchange account registered in his name to a Hyperliquid wallet ending 0x8081. Later that same day, according to the affidavit, he received a second Slack message confirming the March 13 listing at 9:00 a.m. He opened long POPCAT perpetuals on March 13 and closed them at a profit after the token became tradeable but before Robinhood’s public announcement. The complaint alleges at least ten further episodes through February 2026, including MEW and MOODENG in May 2025, ONDO in August 2025, and RENDER in January 2026.
Chai’s complaint is structured differently because the trading ran through three wallets rather than one. The affidavit ties wallets ending 0x548, 0xAf1, and 0xF01 to an exchange account Chai opened in December 2017, and it does so entirely by inference from transfers moving between the wallets and that account. The government alleges at least ten episodes between 2025 and January 2026: MEW and MOODENG, ASTER and XPL, HYPE, ENA, AERO, SYRUP, LDO, DOT, and LIT.
The One-Hour Window
Both affidavits explain a timing quirk the whole theory depends on. A digital asset can become tradeable on Robinhood Crypto up to an hour before the company announces the listing, and price pressure often starts in that gap. That is why, according to the complaints, the defendants kept closing their long positions before any announcement went out. They were selling into demand the listing itself created.
The Charging Architecture
Count One charges commodities fraud under 7 U.S.C. § 9(1), 7 U.S.C. § 13(a)(5), and 17 C.F.R. § 180.1, with aiding and abetting liability under 18 U.S.C. § 2. Section 9(1) makes it unlawful to use a manipulative or deceptive device in connection with a swap, a contract of sale of a commodity in interstate commerce, or a contract for future delivery on or subject to the rules of a registered entity. Rule 180.1 is the implementing regulation, modeled on SEC Rule 10b-5. Section 13(a)(5) supplies the criminal penalty: up to 10 years and a $1,000,000 fine for anyone who willfully violates the Act or a rule under it.
Count Two charges wire fraud under 18 U.S.C. § 1343. The pleaded scheme is misappropriation of Robinhood’s confidential business information, used to trade perpetuals in breach of a duty, in order to obtain money and property from trading counterparties.
Put the two counts side by side and the design shows. Rule 180.1 attaches to the derivative transaction rather than to the underlying token. Wire fraud attaches to the information. Neither count asks a court to decide whether POPCAT or MOODENG is a security, which is why they were chosen.
Two things are missing. There is no parallel CFTC enforcement action and no SEC action. And these are complaints, not indictments, which means the government has 30 days under 18 U.S.C. § 3161(b) to obtain an indictment unless the defendants waive. Complaints filed on a magistrate’s probable cause finding are a lower bar than a grand jury indictment, and the charges can change before a formal charging instrument issues.
Paragraph 4(c) of each complaint spends a full page establishing that listing information had commercial value to Robinhood: competitive advantage in listing first, upward price pressure from the platform’s size, lost revenue if customers trade the token elsewhere. That paragraph does the work of an element. It is the government pleading around United States v. Chastain.
Where the Theory Is Vulnerable
The Property Element After Chastain
In July 2025, the Second Circuit vacated wire fraud and money laundering convictions in what the government had called its first crypto insider trading case. United States v. Chastain, No. 23-7038, 2025 WL 2165839 (2d Cir. July 31, 2025). Nathaniel Chastain, a product manager at the NFT marketplace OpenSea, had traded ahead of his own decisions about which NFTs to feature on the site, making roughly $57,000. The Second Circuit held that confidential business information qualifies as “property” under the wire fraud statute only if maintaining its confidentiality has economic value to the company. Reputational harm alone does not suffice. The decision follows Ciminelli v. United States, 598 U.S. 306 (2023), and Kelly v. United States, 590 U.S. 391 (2020), which confined § 1343 to traditional property interests.
The parallels are close. Both cases involve a digital asset platform, a mid-level employee with advance knowledge of what the platform would feature or list, and a profit in the tens of thousands of dollars. The government drafted paragraph 4(c) knowing that. Whether the pleading survives contact with the evidence is a different question. Robinhood does not sell its listing calendar. It does not charge issuers for listings. The complaint’s economic theory is that premature disclosure would let competitors list first and would divert trading volume. That is a chain of inference, and Chastain requires proof of it.
Two details in the affidavits sharpen the point. Each agent states that he reviewed Robinhood’s periodic reports on Form 10-Q and Form 10-K to support the commercial value allegation. Securities filings describe competitive risk in the language of risk factors, drafted for investors and written at a level of generality that applies to every listed company. Whether that boilerplate establishes that this particular information carried economic value is a question for a jury, not a pleading. The second detail is the closing sentence of paragraph 4(c) in both complaints, which rests on the risk of reputational damage to Robinhood’s standing with current and potential customers. Reputational harm is the exact theory Chastain held insufficient.
The second property problem runs the other direction. Count Two alleges the money was obtained from trading counterparties on Hyperliquid. Those counterparties were never deceived. They were anonymous participants in an automated order book who made no representations and received none. Carpenter v. United States, 484 U.S. 19 (1987), supplies the answer the government will give, which is that the property taken was the employer’s information. But the complaint pleads the object of the scheme as money from counterparties, and Chastain pointedly noted that no fraud-on-the-market theory was advanced there either.
Asset Classification and the Jurisdictional Hook
Section 9(1) reaches deceptive conduct in connection with one of three things. The third, a contract for future delivery on or subject to the rules of a registered entity, is unavailable on these facts. The complaints concede it: they state that Hyperliquid does not have CFTC approval to operate a futures contracts market and that it geofences U.S. IP addresses. That leaves two hooks, and each carries a classification fight.
The first is whether a Hyperliquid perpetual is a “swap” within 7 U.S.C. § 1a(47). Perpetuals do not expire and settle through periodic funding payments, which does not map cleanly onto any listed category. The definition also excludes security-based swaps, which belong to the SEC. If a referenced token is a security, the derivative on it may be a security-based swap and outside the CEA count entirely. The government avoided classifying the tokens, but the classification question follows the derivative.
The second is whether each referenced token is a “commodity” in interstate commerce. Only district courts have addressed this, and only for major assets. CFTC v. McDonnell, 287 F. Supp. 3d 213 (E.D.N.Y. 2018), and CFTC v. My Big Coin Pay, Inc., 334 F. Supp. 3d 492 (D. Mass. 2018), held that virtual currencies fall within the definition. No appellate court has so held, and no court has addressed a meme token of the kind at issue here. The complaints name POPCAT, MOODENG, MEW, ASTER, XPL, HYPE, ENA, AERO, SYRUP, LDO, DOT, LIT, ONDO, and RENDER. They are not fungible for legal purposes.
Classification runs through nearly every digital asset enforcement matter now, criminal and civil. Whether an asset is a security, a commodity, or neither decides which agency has authority, which statute supplies the elements, which precedent controls, and what the maximum sentence is. Charging documents increasingly route around the question rather than answer it, as both complaints here do, which leaves the issue live for the defense to raise on a motion to dismiss, in jury instructions, and at sentencing. Armstrong & Bradylyons litigates asset classification for clients in Justice Department prosecutions and in parallel CFTC and SEC proceedings, including matters where the government’s theory depends on a characterization no court has adopted. That work runs through the firm’s cryptocurrency fraud and money laundering practice.
Fair Notice and the Statutory Structure
There is no codified prohibition on insider trading in the Commodity Exchange Act that covers these defendants. The misappropriation theory under Rule 180.1 comes from the preamble to the CFTC’s 2011 adopting release, which said that trading on material nonpublic information in breach of a pre-existing duty “may be” a violation. See 76 Fed. Reg. 41,398 (July 14, 2011). The Commission said it would be guided, but not controlled, by Rule 10b-5 case law. It never conducted a rulemaking on the subject. A sitting Commissioner has publicly criticized the agency’s inconsistent terminology in these cases and its reliance on securities-law terms of art. See the 2023 dissenting statement on the misappropriation theory in derivatives markets.
Courts have noticed. In the CFTC’s first litigated insider trading case, a jury rejected the Rule 180.1 count outright, and the Fifth Circuit then reversed the remaining judgment because the defendants lacked fair notice of the agency’s unprecedented reading of a decades-old rule. CFTC v. EOX Holdings, L.L.C., No. 22-20622 (5th Cir. Jan. 8, 2024), available from the Fifth Circuit’s published opinions. Fair notice concerns carry more weight in a criminal case than a civil one.
The statutory structure adds force. Congress did write a criminal insider trading provision for commodities. It sits at 7 U.S.C. § 13(e), it reaches employees, governing board members, and committee members of a board of trade, registered entity, or registered futures association, and it caps punishment at five years. Robinhood is none of those things, so § 13(e) does not reach these defendants. The government instead uses the general catch-all at § 13(a)(5), which doubles the exposure to ten years. Defendants can argue that Congress drew a deliberate line and that the catch-all should not be read to erase it. The willfulness element in § 13(a)(5) gives that argument a second front.
Attribution
Neither complaint places a defendant at a keyboard. The evidence is wallet activity and its correlation with Slack messages, and correlation is where these cases get fought.
For Chai, the affidavit connects three wallets to an exchange account by tracing transfers between them, and the agent frames each conclusion as a belief rather than a fact. The document contains at least one internal inconsistency in the wallet identifiers it uses. The transfers themselves vary in weight. Wallet-0x548 sent roughly $100,000 to the exchange account, which is substantial. The reciprocal transfer the affidavit relies on to complete the two-way inference is five dollars in Ethereum. Wallet-0xAf1 presents a timing problem. The affidavit ties it to Chai through roughly $7,550 received from his account in October and November 2024 and roughly $75,000 sent onward in July 2025. The trades charged to that wallet occurred in May 2025, between those two events.
For Xiang, the attribution problem is sharper. Paragraph 7 shifts to passive voice: the wallet “was used for trading.” And footnote 4 discloses that a second person, apparently residing outside the United States, sent roughly $33,395 in USDC into that same wallet the day of the first charged trade. The government identifies that person as an associate based on a visa application listing Xiang as a point of contact. Shared funding of a shared wallet is a fact the defense did not have to develop. It is in the government’s own affidavit.
Neither complaint alleges IP evidence, device evidence, or exchange login records tying a defendant to any specific order. Neither alleges where the trades were placed from, which matters because the complaints themselves say Hyperliquid blocks U.S. addresses.
The Episodes That Do Not Fit
A charging document that pleads more than twenty episodes invites a jury to see a pattern. Reading the episodes one at a time produces a different picture.
Xiang funded the 0x8081 wallet with 18 Ethereum on March 12, 2025, before he received the Slack message confirming the POPCAT listing date. The earlier March 10 message said only that Robinhood was considering the listing. For the MEW positions in May 2025, the complaint alleges the wallet closed the positions before the token was even available for trading and pleads no profit. On Chai’s side, the AERO episode in December 2025 describes a position closed after the public announcement, with no profit alleged, and the LIT episode in January 2026 also pleads no profit. Several other episodes state that Chai closed positions both before and after the public announcement, including XPL, LDO, DOT, and LIT. A trader who holds a position through the announcement is not front-running it.
Rule 180.1 liability requires trading on the basis of the information, and a criminal conviction requires willfulness. Episodes where the trading does not track the information, or produces no gain, cut against both.
Conduct in the Open
Concealment is usually the spine of a fraud case. It is largely absent here.
Both defendants funded their trading from cryptocurrency exchange accounts registered in their own names. Chai opened his in December 2017, four years before he joined the listing team. Xiang opened his in July 2022, nearly three years before the first charged trade. Neither is alleged to have used a nominee, a shell entity, a mixer, or a privacy coin. Chai is alleged to have moved roughly $125,000 back out to the same account that carries his name.
The platform cuts the same way. Both affidavits state that the agent relied on publicly available information reflecting trading on Hyperliquid. Positions on that platform sit on a public ledger. Anyone can see them. A person who believes he is committing a ten-year federal felony does not usually execute it on an open blockchain from a wallet funded by a know-your-customer account in his legal name.
The government has an answer, which is that sophistication is not an element and that plenty of insider trading cases involve defendants who left obvious trails. The defense answer is that willfulness under 7 U.S.C. § 13(a)(5) asks what the defendant believed about the lawfulness of his conduct, and that behavior in the open is evidence on that question.
The choice of instrument will be argued both ways. Neither defendant is alleged to have bought the tokens on the spot market or to have traded Robinhood stock. They traded perpetuals on an offshore decentralized exchange. The government will say that is structuring around a policy that named Robinhood and every other platform. The defense will say it reflects a belief that derivatives on a non-U.S. venue fell outside a policy written for company-platform trading. A jury decides which.
Venue
Venue must be established for each count. Xiang worked out of Manhattan, and that is largely the end of the question for him. Chai lived in Menlo Park, California. The complaint’s venue hook is that listing information was shared in the Slack channel by Robinhood employees based in Manhattan. Wire fraud venue can lie where a wire was sent, received, or passed through, and the Second Circuit applies a substantial contacts test to confirm that the chosen district is not arbitrary. United States v. Reed, 773 F.2d 477 (2d Cir. 1985); United States v. Tzolov, 642 F.3d 314 (2d Cir. 2011). The government will likely carry that burden. It is still a burden, and it is litigated by preponderance on each count rather than assumed from the caption.
A Document Case Before It Is a Trading Case
Strip away the blockchain vocabulary and this is a records prosecution. The proof is paper and data, and there is a great deal of both.
On the compliance side: the full export of a private Slack channel with timestamps and membership history, the written Confidential Information and Insider Trading Policy and every version of it in force during the charged period, acknowledgment and training records, individual notice emails, access provisioning logs establishing when each employee became a Coin Aware Individual, role descriptions, personnel files, and the work product of Robinhood’s internal investigation. On the trading side: every on-chain transaction for four wallets across roughly eighteen months, with position opens, closes, funding payments, leverage, and settlement prices, plus subpoenaed account records from the cryptocurrency companies holding the linked exchange accounts. Add Robinhood’s listing calendar, its internal launch timelines, and its market data on post-listing price movement.
Volume favors the government at the charging stage and can turn against it at trial. An affidavit is a selection. Paragraph 7 of each complaint picks a handful of clean episodes and says there were at least ten. The episodes that do not fit the pattern appear in a subordinate clause or not at all. A jury never sees the underlying dataset unless the defense puts it there.
That is the work. Reconstruct the complete trade history rather than the charged subset. Establish how many employees had the same Slack access on each date, because a timing correlation is only as strong as the pool of people it excludes. Test the clustering and control assumptions behind each wallet attribution with a forensic expert. Compare the government’s gain figure against actual realized profit and loss position by position, including the losers. Read the internal investigation file against what the company told the government. Trace the policy language back to the version actually in effect on each trade date.
None of that happens in a plea negotiation. It happens in a case worked up for trial, and the leverage it produces is the same whether the case ends in a motion, a favorable resolution, or a verdict. Both profit allegations in these complaints read simply “more than $50,000,” identical language in both documents. That is a probable cause threshold, not a computed figure. Under the Sentencing Guidelines the gain number drives the range, and it is calculated later, from the data.
What This Means for Exchanges and the People Who Work at Them
The compliance lesson here is about how a company handles its own information. Robinhood built a restricted channel, labeled it confidential, limited access to a defined group, issued a written policy naming crypto-assets and event contracts, sent individual notices, and imposed a 24-hour blackout. Every one of those controls now appears in a federal affidavit as evidence of the defendants’ knowledge. A company with weaker controls would have handed prosecutors a weaker case. A company with none would have handed them a Chastain problem.
For employees, the category of exposure has widened. The theory does not require trading the asset itself, or the asset being a security, or a trade on a U.S. or regulated venue. It requires a duty and a derivative referencing something the employer was about to move. That description fits product managers, engineers, listing committee members, market operations staff, and contractors at every venue that decides what gets listed and when.
Anyone contacted by the FBI in a matter of this kind is being approached before charges, not after. What happens in that first conversation frequently determines whether a person is a witness or a defendant. Scott Armstrong served as an Assistant Chief in the Market Integrity and Major Frauds Unit of DOJ’s Fraud Section, the unit that brings federal commodities fraud cases. He was co-lead trial counsel in the nation’s leading market manipulation prosecution, tried against two senior traders at a financial institution for years of manipulative conduct in precious-metals futures. He was also lead trial counsel in the first cryptocurrency market manipulation case charged under Title 15, a multi-week jury trial involving more than $300 million in spoof and wash trades. Both were tried on trading records, internal communications, and compliance documents, which is what these complaints are made of. Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia and as an Assistant Chief in the Fraud Section. The firm’s securities and commodities fraud defense practice handles these matters from the first agent contact through trial.
The exposure in cases like this one reaches past the employee who held the information. Aiding and abetting liability under 18 U.S.C. § 2 is charged in Count One of both complaints, and footnote 4 of the Xiang affidavit identifies a second person who funded the charged wallet. Tippees, counterparties, account holders, and the people who receive a call from a friend at a listing venue all sit inside the same investigation. The firm defends traders and individual investors as well as corporate insiders. Its insider trading defense practice covers misappropriation and tipping theories under Section 10(b) and Rule 10b-5, Commodity Exchange Act Section 6(c)(1) and Rule 180.1, and the wire fraud statute, along with the parallel SEC and CFTC investigations, self-regulatory inquiries, and exchange referrals that often arrive before any criminal charge.
Both defendants are presumed innocent. A criminal complaint is a sworn accusation supported by probable cause, and nothing in it has been tested by cross-examination or reviewed by a grand jury.
Frequently Asked Questions
What is commodities fraud under 7 U.S.C. § 9(1) and CFTC Rule 180.1?
Section 6(c)(1) of the Commodity Exchange Act, codified at 7 U.S.C. § 9(1), prohibits the use of any manipulative or deceptive device or contrivance in connection with a swap, a contract of sale of a commodity in interstate commerce, or a contract for future delivery on or subject to the rules of a registered entity. 17 C.F.R. § 180.1 implements it and is drafted to track SEC Rule 10b-5. The rule reaches fraudulent devices, material misstatements and omissions, and courses of business operating as a fraud.
Criminal liability comes from 7 U.S.C. § 13(a)(5), which makes a willful violation of the Act or any rule under it a felony punishable by up to ten years and a $1,000,000 fine. Three elements drive the analysis: a manipulative or deceptive device, the required connection to a swap or commodity transaction, and scienter. In a criminal case, the government must also prove willfulness, a higher standard than the recklessness that can support civil liability. The CFTC has stated it will be guided but not controlled by Rule 10b-5 precedent, which means courts applying § 180.1 are not bound to import securities doctrine wholesale.
Can a cryptocurrency token be a “commodity” under the Commodity Exchange Act?
The statutory definition at 7 U.S.C. § 1a(9) is broad. It covers enumerated agricultural products and, more generally, all other goods and articles and all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in. Two district courts have applied that language to virtual currency. CFTC v. McDonnell, 287 F. Supp. 3d 213 (E.D.N.Y. 2018), and CFTC v. My Big Coin Pay, Inc., 334 F. Supp. 3d 492 (D. Mass. 2018), both held that a virtual currency can be a commodity for CEA purposes.
Neither decision is binding outside its district, and no court of appeals has ruled on the question. The reasoning in both turns partly on the existence of futures trading in the relevant asset class, which raises a circularity problem when applied to a newly issued token whose only derivatives market is the unregulated venue at issue. The classification also has a boundary: assets that are securities fall under SEC jurisdiction, and a swap referencing a security may be a security-based swap excluded from the CEA definition of “swap.” Prosecutors who decline to classify a token as a security have not thereby resolved whether it is a commodity. The question remains open, asset by asset.
Is insider trading in cryptocurrency illegal when the token is not a security?
There is no statute titled “insider trading” that applies generally to digital assets. Liability is constructed from other law. Where the asset is a security, Section 10(b) and Rule 10b-5 apply. Where a derivative on a commodity is involved, the government can proceed under CEA Section 6(c)(1) and Rule 180.1. Where neither fits, prosecutors have used the wire fraud statute on a misappropriation theory.
All three routes require a breach of duty. The Supreme Court’s decision in United States v. O’Hagan, 521 U.S. 642 (1997), held that trading on information misappropriated from a source to whom the trader owed a duty of trust and confidence is deceptive conduct. The CFTC has adopted the same framing for Rule 180.1, describing the violation as trading on material nonpublic information in breach of a pre-existing duty. See the agency’s whistleblower alert on insider trading and improper use of information. Trading on nonpublic information obtained without any duty, from public blockchain analysis or independent research, is not covered by any of these theories.
What does United States v. Chastain mean for crypto insider trading prosecutions?
United States v. Chastain, No. 23-7038, 2025 WL 2165839 (2d Cir. July 31, 2025), vacated wire fraud and money laundering convictions of an OpenSea product manager who traded NFTs ahead of decisions about which NFTs the platform would feature. The Second Circuit held that the trial court erred by instructing the jury that confidential business information could be “property” under § 1343 even if it lacked commercial value to the company. The court also rejected an instruction permitting conviction for departing from notions of honesty and fair play.
The holding narrows a route prosecutors had used to sidestep asset classification. Under Chastain, the government must prove the information had economic value to its owner, and generalized reputational harm does not satisfy that requirement. The decision applies the Supreme Court’s limits in Ciminelli and Kelly to the corporate information context first recognized in Carpenter v. United States, 484 U.S. 19 (1987). In any digital asset platform case built on internal listing data, the charging document has to plead, and the trial record has to establish, that confidentiality carried measurable commercial value.
What penalties do commodities fraud and wire fraud carry in federal court?
A willful violation of the Commodity Exchange Act or a rule under it is a felony carrying up to ten years in prison and a fine of up to $1,000,000 under 7 U.S.C. § 13(a). Wire fraud under 18 U.S.C. § 1343 carries up to twenty years, or thirty where the scheme affects a financial institution. Forfeiture of proceeds and restitution can follow a conviction.
Statutory maximums rarely describe actual outcomes. Sentences in fraud cases are driven by the advisory Sentencing Guidelines, where the dominant variable is the loss or gain figure, adjusted by characteristics such as abuse of a position of trust or use of sophisticated means. In a case alleging profits above $50,000, the guidelines range is measured in months while the statutory ceiling is measured in decades. The gain calculation itself is frequently contested, particularly where positions were opened and closed across multiple wallets and where some trades produced no profit at all.
Can someone who is not a corporate insider be charged with insider trading?
Yes. Liability does not require employment at the company whose information is involved. A person who receives material nonpublic information from someone who breached a duty can be charged as a tippee, and a person who trades an account funded or directed by another can be charged as a participant. Both complaints here include aiding and abetting liability under 18 U.S.C. § 2, and the Xiang affidavit discloses a second person who transferred funds into the charged wallet.
Under the securities framework, tippee liability requires that the tipper breached a duty for a personal benefit and that the tippee knew of that breach. Dirks v. SEC, 463 U.S. 646 (1983); Salman v. United States, 580 U.S. 39 (2016); United States v. Martoma, 894 F.3d 64 (2d Cir. 2018). How much of that structure carries over to Rule 180.1 and to wire fraud charges has not been settled, which is itself a contested issue in commodities cases. The practical point for traders, fund employees, and account holders is that the government builds these cases from communications and money flow, and people several steps removed from the source frequently receive subpoenas or agent visits before anyone is charged.
How do federal prosecutors attribute a blockchain wallet to a specific person?
Attribution is built by layering. Investigators start with exchange records obtained by subpoena, which carry know-your-customer identification. They then trace transfers between the identified account and the wallets at issue, treating bidirectional flow as evidence of common control. Blockchain analytics tools cluster addresses by heuristics such as common-input ownership. Prosecutors supplement this with IP logs, device data, email and messaging records, and payment records.
Each layer is an inference. Clustering heuristics misfire on shared custody and on wallets used by more than one person. A transfer between an identified account and a wallet establishes a relationship, not exclusive control. Timing correlation between an information event and a trade is circumstantial evidence that grows weaker as the number of people with access to the same information grows. Affidavits written in the passive voice, describing what a wallet did rather than what a person did, signal where the government’s proof is thinnest. The firm works with blockchain forensics experts to test clustering methodology, control assumptions, and gain calculations in every cryptocurrency fraud and money laundering matter it defends.
What is the difference between a criminal complaint and an indictment in federal court?
A criminal complaint is a sworn affidavit, usually by a federal agent, presented to a magistrate judge who determines whether probable cause supports an arrest. No grand jury participates. An indictment is returned by a grand jury of citizens and is required by the Fifth Amendment for a federal felony prosecution unless the defendant waives it.
The distinction has practical consequences. Under 18 U.S.C. § 3161(b), the government generally has thirty days from arrest to obtain an indictment. Charges can be added, narrowed, or dropped in that window, and the legal theory can shift. A defendant charged by complaint is also entitled to a preliminary hearing under Rule 5.1 unless indicted first. Complaints are frequently more detailed than indictments because they must establish probable cause on their face, which means they often disclose more of the government’s evidence and, at times, more of its weaknesses than a later indictment will.
Does trading on a decentralized exchange that blocks U.S. users limit federal jurisdiction?
Not by itself. The Commodity Exchange Act reaches activities outside the United States that have a direct and significant connection with activities in or effect on U.S. commerce under 7 U.S.C. § 2(i), and the wire fraud statute reaches interstate and foreign wires. A venue’s lack of registration with the CFTC removes one jurisdictional hook under § 9(1), the one tied to registered entities, but leaves the swap and commodity-in-interstate-commerce hooks intact.
Geofencing does create evidentiary questions. Where a venue blocks U.S. addresses, the government has to establish how and from where the trades were placed, which typically requires IP records, VPN records, or device evidence rather than on-chain data alone. Venue under 18 U.S.C. § 3237 is a separate inquiry from jurisdiction and must be proven for each count. The Second Circuit applies a substantial contacts test that asks whether the chosen district has a meaningful relationship to the charged conduct. United States v. Reed, 773 F.2d 477 (2d Cir. 1985).
What counts as a “pre-existing duty” in a commodities misappropriation case?
The CFTC has described the required duty as arising from another law or rule, an agreement, an understanding, or some other source. See 76 Fed. Reg. 41,398, 41,403 (July 14, 2011). In practice the duty is usually an employment relationship documented by a confidentiality agreement, a code of conduct, or a written trading policy.
The breadth of that formulation is contested. Unlike the securities laws, the CEA contains no codified insider trading prohibition reaching ordinary corporate employees, and the Commission adopted the misappropriation theory through an adopting-release preamble rather than notice-and-comment rulemaking. A sitting Commissioner has publicly objected to the agency’s shifting terminology in these matters. When the CFTC first litigated a Rule 180.1 insider trading count to verdict, the jury found for the defense, and the Fifth Circuit later reversed the remaining judgment on fair notice grounds. CFTC v. EOX Holdings, L.L.C., No. 22-20622 (5th Cir. Jan. 8, 2024). Fair notice arguments carry additional force in a criminal case, where the government must prove a willful violation.
Can statements made during an employer’s internal investigation be used in a federal prosecution?
Yes. When a company investigates suspected misconduct and then self-reports, the interview memoranda, the employee’s own statements, and the supporting documents frequently end up in the government’s file. The attorney-client privilege in that setting belongs to the company, not to the employee, and the company can waive it. Upjohn Co. v. United States, 449 U.S. 383 (1981). Counsel conducting the interview is required to warn the employee that the privilege is the company’s, though the warning is often delivered quickly and not always understood.
The Fifth Amendment generally does not apply to questioning by a private employer, because the compulsion comes from the risk of termination rather than from the state. Both complaints in the Robinhood matter state that the agent spoke with a Robinhood employee and reviewed documents the company produced, which is the ordinary pattern where a corporation investigates first and refers the matter second. By the time an employee learns an internal review has begun, the process generating evidence for a later criminal case is already running, and the order in which it ran is itself worth examining.
What experience does Armstrong & Bradylyons PLLC bring to commodities fraud and digital asset prosecutions?
Scott Armstrong served nearly a decade at DOJ’s Fraud Section, including as an Assistant Chief in the Market Integrity and Major Frauds Unit, the unit responsible for federal commodities and securities fraud prosecutions. He was co-lead trial counsel in the nation’s leading market manipulation prosecution, tried against two senior traders at a financial institution for years of manipulative conduct in precious-metals futures. He was lead trial counsel in the first cryptocurrency market manipulation case charged under Title 15, a multi-week jury trial involving more than $300 million in spoof and wash trades, and in a $650 million Ponzi prosecution tried to verdict. Those cases were tried on trading data, chat records, and compliance files, the same categories of proof that make up these complaints. Drew Bradylyons served as Chief of the Financial Crimes and Public Corruption Unit at the U.S. Attorney’s Office for the Eastern District of Virginia, where he supervised parallel criminal and civil enforcement, and as an Assistant Chief in the Fraud Section.
The firm’s attorneys have over 25 years of combined DOJ experience and 25 federal jury trials. Its defense work includes representing a foreign national indicted for wire fraud and money laundering conspiracy in an alleged $260 million cryptocurrency theft, and individuals in federal investigations involving ransomware, SIM-swap attacks, and computer fraud. Through its securities and commodities fraud defense practice and its insider trading defense practice, the firm represents traders, portfolio managers, employees, executives, and companies in the districts where these cases concentrate, including the Southern and Eastern Districts of New York, the District of Columbia, and the Eastern District of Virginia, and in every other federal district. That work includes tippee and downstream-recipient matters, parallel SEC and CFTC proceedings, investigations that begin with an exchange referral or an employer’s internal review, and digital asset enforcement matters that turn on whether the asset at issue is a security, a commodity, or neither under federal law.
Under Investigation for Commodities Fraud, Wire Fraud, or Digital Asset Trading?
Armstrong & Bradylyons PLLC defends traders, employees, executives, and companies in federal insider trading, commodities fraud, and digital asset investigations nationwide. As former DOJ prosecutors, Scott Armstrong and Drew Bradylyons built and supervised the market integrity cases the government brings today.
