What just happened? A federal case unfolding in New York shows what can happen when someone with access to company secrets decides to test their luck on prediction markets. Michele Spagnuolo, a Google engineer who'd been with the firm for over a decade, allegedly used his access to internal data to place bets on Polymarket – and it worked extremely well. The 12-year veteran of Google's information security team now faces federal charges of commodities fraud, wire fraud, and money laundering.
Spagnuolo, an Italian citizen who lives in Switzerland, was arrested on Wednesday and hauled before a federal judge in New York. Prosecutors say he made roughly $1.2 million by betting on outcomes he already knew.
The scheme centered on Google's annual "Year in Search" report, which tracks the most searched topics and people. Spagnuolo had access to that data before it went public and allegedly used it to inform his trades on Polymarket, a crypto-based prediction platform where people bet on everything from election outcomes to pop culture trends.
"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," prosecutors wrote in the criminal complaint.
Between mid-October and early December 2025, Spagnuolo placed around $2.7 million in bets on who would top Google's search rankings. He went heavy on "no" bets for obvious names like Donald Trump and Bianca Censori while putting money on d4vd, a musician whose odds were near zero. When Google released the Year in Search results in December, those bets paid off handsomely.
What makes this case particularly awkward for Google is that Spagnuolo didn't hack anything. He used tools that all employees could access. The company confirmed as much in a statement, saying he "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." Google has placed him on leave and says it's cooperating with investigators.
The bets were placed through an account called "AlphaRaccoon" on Polymarket, and they didn't go unnoticed. By early December, people on Discord and X started speculating that whoever was behind the account had inside information, as the betting patterns were just too precise. Shortly after the chatter picked up, the "AlphaRaccoon" username disappeared, reverting to a generic alphanumeric wallet address.
That username change didn't help much. Polymarket runs on blockchain technology, which means every transaction is permanently recorded and traceable. That helped authorities track him down.
"Blockchain trading is transparent, traceable, and bad actors leave footprints," a Polymarket spokesperson said.
The FBI pieced it together by analyzing blockchain records, reviewing documents from Polymarket, and checking records from cryptocurrency service providers. The key link came from a crypto account that Spagnuolo had opened using his Italian government ID. That account funneled money to the wallet that funded the AlphaRaccoon bets.
After the wagers paid out, the account received more than $3.9 million in USDC.e, a stablecoin tied to the US dollar. From there, over $5 million moved back through intermediary wallets. Some of that extra cash appears to have come from other profitable Polymarket trades, though prosecutors haven't specified which ones.
The Commodity Futures Trading Commission has also filed a civil complaint against Spagnuolo, seeking to recover his profits and impose financial penalties. CFTC Chairman Michael Selig said the case "underscores our commitment to rooting out insider trading and promoting market integrity in prediction markets."
If convicted on the criminal charges, Spagnuolo could face up to 50 years in prison, though any sentence would be determined by a judge. He's been released on a $2.25 million bond.