Original | Odaily Planet Daily (@OdailyChina)
Author | Asher (@Asher_ 0210)
The biggest fear in prediction markets isn't someone making an accurate bet, but someone knowing the answer in advance.
Recently, prosecutors from the Southern District of New York announced in court documents that Google security engineer Michele Spagnuolo is suspected of using internal company tools to view data related to the most searched people in 2025, and trading in corresponding markets on Polymarket via associated accounts, ultimately profiting over $1.2 million. Spagnuolo has been arrested and charged, facing counts including commodities fraud, wire fraud, and money laundering.
A Google Employee Targets the Search Ranking Market
The starting point of this case is the prediction markets on Polymarket related to Google search results. These markets predict whether certain individuals will appear on the list of the most searched people in 2025. For ordinary traders, this is a true/false question about trends and popularity, but Spagnuolo's position made the matter sensitive.
Court documents show that Spagnuolo, a Google security engineer, had access to internal tools for viewing relevant search data. Subsequently, an associated account named AlphaRaccoon began buying on Polymarket. This account transferred approximately 3.8 million USDC to a Polymarket address and participated in several prediction markets related to Google search results.
The most crucial transaction involved the singer D4vd. Spagnuolo had seen through Google's internal tools that D4vd's search popularity was rising. Several hours later, the AlphaRaccoon account traded on Polymarket, betting that D4vd would become one of the most searched people in late November.
This is also the core of the prosecution's case. An ordinary user buying D4vd is betting on news trends and social media buzz; but if a trader has just viewed Google's internal search data before trading in the corresponding market, that trade is no longer just about spotting a trend. Prosecutors argue that Spagnuolo used material non-public information to participate in trading and profited over $1.2 million through related operations.
From Polymarket to an Italian Account, the Money Trail Emerges
After the trading profits were made, the flow of funds also came under prosecutorial scrutiny.
Court documents indicate that AlphaRaccoon subsequently transferred 5 million USDC.e from the Polymarket account to a wallet. The funds were then moved through exchange services and privacy tools, with part of the funds ultimately entering an account at a payment processing institution in Italy. Prosecutors state that this account was opened using Spagnuolo's own identification documents.
In other words, the prosecution didn't just discover an account with abnormal profits on Polymarket; they have connected the internal tool access logs, trading times, on-chain transfer paths, use of privacy tools, and the real-world account that ultimately received the funds.
Google Responds: Cooperating with Investigation, Spagnuolo Suspended
Google subsequently responded, stating the company is cooperating with law enforcement's investigation and has suspended Spagnuolo.
A Google spokesperson said the employee used a tool accessible to company employees to view relevant marketing materials, but using such confidential information for trading is a serious violation of company policy, and the company will take appropriate action.
Prosecutors further allege in the court documents that Spagnuolo not only used material non-public information to participate in Polymarket trading but also attempted to conceal the source and ownership of the proceeds by transferring funds through wallets, exchange services, and privacy tools after profiting.
Polymarket's Compliance Pressure Enters Deeper Waters
The impact of this case extends beyond the arrest of one Google engineer.
Recently, Polymarket has faced more controversy regarding regional access and regulatory classification. The Spanish government issued a preventive blocking order against Polymarket, citing that the platform was suspected of operating without a gambling license. Indonesia's Ministry of Communication and Information Technology also blocked Polymarket, labeling it an illegal online gambling platform.
Now, the pressure is shifting to the trades themselves. According to a report by The Information, Polymarket is pushing traders to undergo KYC identity verification to reduce potential sanctions and legal risks. Meanwhile, some users still participate in trading through automated trading bots, Telegram tools, and gray channels, making it increasingly difficult for the platform to avoid one question—who exactly is behind these trades.
Faced with regulatory scrutiny, Polymarket's response emphasizes cooperation and traceability. The platform stated that it has cooperated with US prosecutors and the CFTC, and highlighted that blockchain transactions are transparent and traceable.
In this context, the Spagnuolo case is more like a signal. The risk for prediction markets is no longer just "whether users can trade on a particular event," but whether the platform has the ability to prove that the source of trades, fund paths, and information sources can withstand scrutiny as the market grows larger and traders become more complex.
Polymarket can still tell the story of "trading probability," but regulators are now asking a more specific question: behind the probability, who is trading, and with what information.
