Polymarket CEO ignored $10M fraud, CFTC investigating

Polymarket CEO Shayne Coplan told employees to keep growing and pay a fine if regulators found out after fraudsters tried to steal at least $10 million from the prediction market's U.S. platform in February, according to the Wall Street Journal .

The attack involved thieves who attached stolen debit cards to thousands of Polymarket U.S. accounts, using them to place bets and funnel proceeds into accounts under their control. Checkout.com, the payment processor, at one point flagged as fraudulent more than 80% of incoming deposits — a figure the Journal said dwarfs the roughly 1% that is typical across the industry.

When compliance staff brought their worries to Coplan, his reply left them stunned, the Journal reported, drawing on accounts from people with knowledge of the situation. Current and former employees described his reaction as typical of a broader push for growth at all costs.

The Commodity Futures Trading Commission has opened an investigation into Polymarket, and staff have received instructions to preserve records tied to the fraud attack and other matters. Former regulators cited by the Journal said the scale of the attempted fraud and the company's response were atypical for the commodities and gambling industries.

In the aftermath, Polymarket's chief compliance officer, Andrew Clifford, resigned in April after sending executives a report detailing some of the fraud issues, according to the Journal. The U.S. division's CEO, Justin Hertzberg, was later fired, and the heads of U.S. regulation and anti-money-laundering also left. Sullivan & Cromwell, the law firm hired to investigate, determined that Polymarket had acted in compliance with applicable regulations.

Seeking to clear a backlog of pending withdrawals that the fraud surge had created, executives eliminated a policy mandating that money be returned to the same payment method used for deposits, despite warnings from some staff that doing so could invite money laundering. Former federal prosecutors who spoke with the Journal said weak anti-money-laundering safeguards risk running afoul of federal statutes covering money laundering and illicit fund transfers.

Polymarket said its "market integrity framework includes processes to detect, review and respond to suspicious activity," according to a company spokesman cited by the Journal.

Polymarket faces a New York City Council investigation into its marketing practices and more than a dozen state lawsuits over whether it operates as an unlicensed gambling platform. The company is also raising $1 billion in a round that values it at around $21 billion, with Donald Trump Jr.'s investment fund 1789 Capital putting in roughly $300 million. Polymarket recently named Warren Jenson as its first CFO as it prepares for a potential initial public offering.

By May, Polymarket said it had reduced fraud rates to industry norms, partly by capping how many debit cards a user could attach to their account.