Robinhood shares dropped more than 5% on Wednesday after two former employees were charged with fraudulent cryptocurrency trading, in a case in which prosecutors allege each man earned over $50,000 by using confidential information about token launches.

Hefu Chai, 36, and Huaisong Xiang, 30, were charged by the Justice Department on Tuesday, according to a Forbes report. Xiang's attorney told the publication that Xiang denies the charges.

Prosecutors Allege Trades Used Private Listing Information

The allegations concern transactions based on information the two employees learned before token launches. Prosecutors say Chai and Xiang used that knowledge to trade perpetual futures, a type of derivative contract with no expiration date, and that their trades generated profits on memecoins and on the decentralized exchange Hyperliquid.

The report describes charges against the former employees, not criminal convictions in their cases.

At Robinhood, both men were designated as Coin Aware Individuals. That designation restricted their ability to trade around new cryptocurrency listings and delistings, and it covered trading on Robinhood as well as other platforms. They were barred from trading before, and during the 24 hours after, Robinhood publicly announced a new listing or delisting on Robinhood Crypto.

Robinhood Says It Reported the Matter

Robinhood confirmed to Forbes that it investigated the matter and reported it to regulators. In a statement to Bloomberg, the company said it had immediately alerted law enforcement and regulators.

"Robinhood takes market integrity seriously and has zero tolerance for insider trading," the company said.

The company said its insider-trading policies and procedures cover new crypto listings, and it pledged continued cooperation with the investigations.

"We have robust insider-trading policies and procedures in place, including for new crypto listings," Robinhood said.

Xiang's denial accompanied the allegations. The company's statement described its response to the matter, while prosecutors set out their claims about the employees' trading.

Shares Fell to a Two-Week Low

The decline came one day after the charges were announced. Robinhood's stock fell more than 5.3% to $104.59 shortly before 2:30 p.m. EDT on Wednesday, a price Forbes described as a two-week low following an eight-month high in early September.

At the time of the report, shares had fallen 6.7% since the start of the year, having traded around the $115 mark at the year's opening.

Forbes also reported that shares had risen about 177% since Robinhood went public in 2021, a period that included more than three years of stagnation below the $25 mark.

Earlier Cases Ended in Crypto Trading Convictions

The report placed the charges alongside earlier cryptocurrency trading cases in which U.S. prosecutors secured criminal penalties for trading misconduct. Former Coinbase product manager Ishan Wahi received two years in prison in 2023 for insider trading that generated about $1.5 million. Gotbit founder Aleksei Andriunin received eight months after pleading guilty to federal wire fraud and market manipulation charges.

Those earlier convictions do not establish guilt in the Robinhood employees' cases.

The investigations remain ongoing, and Robinhood said it would continue cooperating with law enforcement and regulators.