A Google security engineer was arrested on May 27, 2026 and charged with using privileged access to the company's internal search-trend data to place winning bets on a prediction market, federal prosecutors alleged — marking the second major insider-trading arrest tied to Polymarket in under a year.
The U.S. Attorney's Office for the Southern District of New York unsealed a complaint against Michele Spagnuolo, a Google security engineer who operated on Polymarket under the username "AlphaRaccoon." The complaint, signed by FBI Special Agent Brandon Racz, charges Spagnuolo with commodities fraud, wire fraud, and money laundering.
The scheme
Polymarket began offering markets last fall on which individuals would rank as Google's most-searched for at year's end. The market structure was clean and verifiable — Google publishes annual "Year in Search" rankings — but it created a straightforward opportunity for anyone with early access to the underlying data.
Spagnuolo allegedly had exactly that. As a Google security engineer, he had access to an internal tool that tracked trending search subjects in real time. The complaint states he used that tool to identify which individuals were trending, then transferred approximately $3.8 million in USDC to a Polymarket address and placed bets accordingly — before the data became public.
The example prosecutors detail is precise: Spagnuolo allegedly accessed Google's internal tool showing that D4vd, a rapper subsequently charged with murdering a 14-year-old girl, was trending heavily in late November. A few hours later, the AlphaRaccoon account placed a bet that D4vd would appear on the most-searched list. The timing gap between the internal data access and the on-chain bet is the core of the government's case.
"Unlike the counterparties to his trades, Spagnuolo knew the outcome of these wagers before the trading public did because he had accessed Google's confidential, commercially valuable internal data," the complaint states. "Spagnuolo personally profited more than approximately $1,200,000 from his trades based on nonpublic information."
The concealment attempt
After winning, Spagnuolo moved 5 million USDC.e from his Polymarket account to a separate wallet. From there, the funds passed through a swapping service and a privacy tool in an apparent effort to obscure their origin. Some of those funds ultimately landed at an account with a payment processor in Italy — an account opened by someone presenting Michele Spagnuolo's government identification card.
That last step is what gave investigators the link. The chain from Polymarket withdrawal to an account in Spagnuolo's name, with his ID on file, ran through privacy tools but not far enough.
A novel enforcement category
Wednesday's arrest is the second federal case in which someone has allegedly exploited privileged information to profit on Polymarket. The first involved a U.S. Army soldier who allegedly placed bets on the U.S. military raid that captured Venezuelan leader Nicolás Maduro — a raid the soldier allegedly participated in. Both cases share the same basic structure: an individual with access to information unavailable to the public used prediction markets as a vehicle to monetize that edge.
That pattern matters structurally. Polymarket's design assumes symmetric information — markets are efficient when all participants are working from publicly available data. Retail traders on the other side of these bets had no way to know they were trading against someone with direct access to the outcome. There is no order-book disclosure, no counterparty identification, no mechanism analogous to the pre-trade transparency rules that govern securities markets.
Federal prosecutors are now applying existing frameworks — commodities fraud, wire fraud, money laundering — to close that gap. The Commodity Futures Trading Commission (CFTC) has jurisdiction over prediction markets structured as event contracts, and this case follows last year's broader regulatory attention on Polymarket's U.S. user base.
Whether those charges stick depends on how courts classify the Polymarket contracts and whether the government can establish the requisite duty of confidentiality toward the trading public. The complaint's language — "material nonpublic information," "confidential, commercially valuable internal data" — tracks the securities fraud vocabulary deliberately, even if the underlying instrument is not a security.
Why this case lands harder
The Maduro case involved a soldier betting on a specific military operation. This one involves a systematic, repeated pattern of accessing an internal corporate data tool and placing bets whose resolution depended on precisely the data that tool tracked. The complaint's phrasing — "knew the outcome of these wagers before the trading public did" — is as clean a statement of the insider-trading thesis as federal prosecutors typically publish.
For Polymarket and the prediction market industry, the enforcement trajectory is now clear: two arrests, both SDNY, both involving insiders betting on outcomes they could see before everyone else. The markets depend on the integrity of the information asymmetry assumption. These cases show that assumption is exploitable, and that DOJ is treating the exploit as a federal crime.
Primary sources: Criminal complaint unsealed by the U.S. Attorney's Office for the Southern District of New York, May 27, 2026, signed by FBI Special Agent Brandon Racz; CoinDesk reporting at coindesk.com/policy/2026/05/27/google-engineer-insider-traded-search-results-on-polymarket-feds-allege.