Original | Odaily Star Daily (@OdailyChina)

Author | Asher (@Asher_0210)

The greatest fear of prediction markets is not that someone can place bets accurately, but that someone knows the answer in advance.

Recently, the U.S. Attorney's Office for the Southern District of New York announced charging documents stating that Google Security Engineer Michele Spagnuolo is suspected of using internal company tools to view data related to the most searched person in 2025 and trading in corresponding markets on Polymarket through associated accounts, ultimately profiting over $1.2 million. Currently, Spagnuolo has been arrested and charged with commodity fraud, telecommunications fraud, and money laundering.

A Google Employee Targeted the Search Rankings Market

The starting point of this case is the prediction market 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 question of judgment regarding trends and traffic, but Spagnuolo's identity makes this matter sensitive.

The charging documents reveal that Spagnuolo is a Google security engineer who can use internal tools to view relevant search data. Subsequently, an associated account named AlphaRaccoon began buying on Polymarket, transferring approximately 3.8 million USDC to a Polymarket address and participating in several prediction markets related to Google search results.

The most crucial transaction pointed to singer D4vd. Spagnuolo had seen through Google’s internal tools that D4vd's search popularity was rising, and a few hours later, the AlphaRaccoon account traded on Polymarket, believing D4vd would be one of the most searched persons by late November.

This is also the core of the prosecution's allegations. Ordinary users buy into D4vd, betting on news trends and discussions on social platforms; however, if a trader has just viewed internal Google search data and is then trading in the corresponding market, this transaction is no longer just about timing it right. The prosecution believes that Spagnuolo used significant non-public information to participate in the trades and profited over $1.2 million through related actions.

From Polymarket to Italian Accounts, Money Trails Surface

After the trading profits, the flow of funds also came into the prosecutor's view.

The charging documents indicate that AlphaRaccoon subsequently transferred 5 million USDC.e from its Polymarket account to a wallet, and then the money was moved through exchange services and privacy tools, with some funds ultimately entering an account of a payment processing institution in Italy. The prosecution claims that this account was opened using Spagnuolo's own identification documents.

That is to say, the prosecution did not just discover an exceptionally profitable account on Polymarket, but has also connected the records of internal tool access, transaction timings, on-chain transfer paths, privacy tool usage, and the real accounts that ultimately received the funds.

Google States: We Are Cooperating with Law Enforcement and Have Suspended Spagnuolo's Position

Google later responded, stating that the company is cooperating with law enforcement in the investigation and has suspended Spagnuolo's position.

A Google spokesperson indicated that the employee used tools accessible to all company staff to view relevant marketing materials, but that trading utilizing such confidential information severely violates company policy, and the company will take appropriate action.

The prosecution further alleged in the charging documents that Spagnuolo not only used significant non-public information to participate in Polymarket trades but also transferred funds after profiting through wallets, exchange services, and privacy tools, attempting to conceal the source and ownership of the profits.

Polymarket Faces Increased Compliance Pressure

The impact of this case goes beyond the arrest of a Google engineer.

Recently, the controversies faced by Polymarket have stemmed more from regional entrance and regulatory classifications. The Spanish government once issued a preventive ban on Polymarket, stating that the platform is suspected of operating without a gambling license; Indonesia's Ministry of Communication and Digital has also banned Polymarket, classifying it as an illegal online gambling platform.

Now, pressure is beginning to focus on the trading itself. According to The Information, Polymarket is pushing traders to undergo KYC identity verification to reduce potential sanctions and legal risks. Meanwhile, some users continue to participate in trading through automated trading bots, Telegram tools, and gray pathways, making it increasingly difficult for the platform to avoid one question—who is actually making these trades.

In the face of regulatory scrutiny, Polymarket's response has been to emphasize cooperation and traceability. The platform stated that it has collaborated with U.S. prosecutors and the CFTC, and claims that blockchain transactions have transparent and traceable characteristics.

In this context, the Spagnuolo case serves more as a signal. The risks of prediction markets are no longer just about whether users can trade on a certain event, but rather as the market grows larger and traders become more complex, whether the platform can prove that the source of trades, paths of funds, and information sources can withstand scrutiny.

Polymarket can still tell the story of “trading probabilities,” but regulators are asking a more specific question: behind the probabilities, who is trading and what information are they trading with?

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