A Google security engineer, Michele Spagnuolo, was arrested and charged over alleged insider trading by placing bets on Polymarket about what Google users were searching, according to a complaint unsealed by the U.S. Attorney's Office for the Southern District of New York. The 36-year-old Italian citizen was arrested Wednesday morning in New York and has worked at Google since 2014, based out of the company's Zurich, Switzerland offices. The charges mark the second major arrest over insider trading on a prediction market, following an earlier arrest of a U.S. Army soldier who allegedly bet on a raid he was part of. As reported by ABC News, this represents the first time a tech worker has been arrested for alleged insider trading activity on prediction platforms. Spagnuolo appeared before a federal magistrate judge Wednesday, did not enter a plea, and was released on a $2.25 million bond.
According to the complaint signed by FBI Special Agent Brandon Racz, Spagnuolo allegedly used material nonpublic information to place bets on who would appear on Google's list of most-searched for individuals for 2025, after Polymarket began offering these markets last fall. The account, which used the username 'AlphaRaccoon', transferred $3.8 million in USDC to a Polymarket address and allegedly accessed Google's internal tool to track trending searches. In one particularly significant instance, Spagnuolo netted $1.2 million trading on who Google's most-searched person of the year would be in 2025, correctly predicting that the winner would be D4vd, a once obscure singer who became the subject of intense public scrutiny after being suspected of murder. As FBI agent Brandon Racz wrote in the complaint, "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 also details how Spagnuolo correctly predicted the outcomes of other search markets, including contracts like "Will Zohran Mamdani rank in the Top 5 most searched" and "Will Squid Game be the #1 searched TV show."
The complaint details how Spagnuolo allegedly attempted to conceal his unlawful activities through a complex money laundering scheme. According to the FBI, the AlphaRaccoon account moved 5 million USDC from their Polymarket account to a wallet, before moving the funds through a swapping service and a privacy tool. Some of the funds were ultimately moved to an account at a payment processor in Italy, which had been opened by someone using Michele Spagnuolo's government identification card. The scheme was designed to obscure the source of funds and the connection to the insider trading activities. Some observers of the Polymarket platform had flagged the user "AlphaRaccoon" back in December for suspicious trades on the most searched person contracts, with the complaint confirming that Spagnuolo was indeed behind that account.
The arrest has sparked significant regulatory interest, with House Committee on Oversight and Government Reform chairman James Comer launching an investigation into insider trading on prediction markets platforms and requesting information from Polymarket about how the company vets its customers. Polymarket has come under fire from lawmakers for its reputation as a hub of illegal activity, with there being two versions of Polymarket: a smaller platform that is legal in the United States and a much larger offshore version that is technically blocked in the US where traders use cryptocurrency to place their wagers. According to Polymarket spokesperson Connor Brandi, the platform "worked closely with the US Attorney's Office for the Southern District of New York and the CFTC, and is the only prediction platform to date whose cooperation has led to insider trading charges in the United States." The company emphasized that "blockchain trading is transparent, traceable, and bad actors leave footprints," and noted that anyone can trace activity on Polymarket's crypto-based platform since all wallet transactions are public. Spagnuolo is also facing a civil case from the Commodity Futures Trading Commission, where he's charged with insider trading. The CFTC complaint alleged that Spagnuolo "misappropriated the material Confidential Information by knowingly or recklessly using it to trade the 2025 Year in Search List Contracts in breach of his duties of trust and confidentiality."
Google has taken swift action following the arrest, with spokesperson Jaclyn Vazquez stating that "the employee accessed our marketing material using a tool available to all employees, but using such confidential information to place bets is a serious breach of our policies. We've placed the employee on leave and will take the appropriate action." The case highlights growing scrutiny of prediction market trading and the potential for insider information to be used for illegal profit-making. Earlier this month, Michael Selig, chairman of the CFTC, told WIRED that the agency is using artificial intelligence tools to hunt for market manipulation and insider trading in the industry. Polymarket has also faced internal challenges, with the company firing an employee earlier this year for using insider information to make trades on a prediction platform, though this marks the first time such activity has resulted in criminal charges. The complaint comes just over a month after another insider trading case on Polymarket, when then-active U.S. Army Special Forces master sergeant Gannon Ken Van Dyke was arrested over charges that he used classified information to bet on contracts related to the U.S. operation to capture Venezuela President Nicolás Maduro, making more than $400,000 off his trades.
