Two Robinhood employees have been charged with crypto fraud following the latest AMC token feud with CEO Adam Aron.
The latest allegations were first reported by Forbes after the DOJ charged the former employees with fraud for making cryptocurrency trades based on confidential information.
Robinhood has recently made headlines after it tokenized AMC Entertainment (NYSE:AMC) stock, resulting in a heated debate with retail investors and CEO Adam Aron.
Aron and AMC shareholders argued Robinhood created a synthetic market that violated securities rules and undermined the integrity of the markets.
Now Robinhood is making headlines again for illegal crypto trades, particularly in ‘memecoins’ through insider trading.
Robinhood employees charged with crypto fraud.
One of Robinhood’s former employees, Hefu Chai, 36, “responsible for the listing of new digital assets,” used insider information and profited using a decentralized exchange.
The second Robinhood employee was Huaisong Xiang, 30, a Robinhood software engineer.
Robinhood had designated both employees as “Coin Aware Individuals,” which meant they were prohibited “from trading on Robinhood or on any other platform prior to and during the 24 hours after Robinhood publicly announces a new listing or delisting on Robinhood Crypto.”
The two violated their agreements from 2025 through 2026, trading to-be-listed memecoins like hippo-themed “Moodeng” and cat-themed “Syrup.”
Like IPOs, cryptocurrencies rise drastically in value when they launch.
The DOJ said that Chai and Xiang earned more than $50,000 each from the illegal trades.
HOOD Stock Falls on Latest Development
Robinhood’s stock HOOD fell over 5% Wednesday following the developments.
The stock is currently trading at $104.42 and is down over 9% this year-to-date.
HOOD is down 12% in the past year alone and has risen 35% in the last 6 months.
“Hefu Chai and Huaisong Xiang are charged with commodities fraud and wire fraud for allegedly exploiting confidential business information taken from their employer to trade perpetual futures,” said FBI Assistant Director in Charge James C. Barnacle, Jr.
“These charges make clear the FBI with its partners will act when individuals access sensitive business information for their own benefit.”
Aron highlighted a few posts from investors directing them at Robinhood CEO Vlad Tenev going over the problems with an AMC tokenized stock.
User Brad M. states, “The concern is not mysterious. You put AMC’s name on a Jersey debt note, sold it as an “AMC Stock Token,” and then asked the CEO of AMC what the problem is. That is the problem.
Retail is not confused about the wrapper. We know it is not a share. No vote. No ownership. No claim on the company. You said that in the fine print. You still used the ticker, the brand, and the price of a company that never hired you to package its equity.
Then you put that wrapper on a permissionless chain with a thin float. It trades 24/7. It sits in DeFi pools. It gets used as collateral and as the quote asset for memecoins. When a small token float gets shoved away from the NYSE print, that is not “innovation.” That is a second AMC market you created without AMC.
A 1:1 claim is not an answer. The concern is you built a synthetic AMC market, kept the economics, left AMC with none of the control, and treated a shareholder-rights question like a support ticket.”
Aron also shared TheRoaringRockets post, stating, “The concern is that you’re offering synthetic exposure to 190+ public companies’ stock without registering these as securities. ‘Tokenized’ doesn’t exempt you from the Securities Act..”
AMC’s Preferred Equity, APE, topped $304.9 million in FTDs last year. The FTDs are reported for the month of August, per Stocksera. FTDs, or Failure-to-deliver…
Frank Nez is an American entrepreneur, journalist, writer, and investor. Frank's work has been cited by SEC and Congressional reports. Franknez.com is a personal finance and market news publication, dedicated to publishing content on money, investing, entrepreneurship, and retail investor news.
