Polymarket Exposed to $10 Million Crime Exploiting Stolen Debit Cards...Will US IPO Be Rejected?

▲ Debit card, security/AI generated image

Polymarket, a prediction market pursuing legalization and an initial public offering (IPO) in the United States, has been exposed to a $10 million fraud crime involving stolen debit cards. Criticism is being raised that the platform neglected basic payment security system management due to focusing on the speed of platform expansion.

According to Daily Hodl on September 22 (local time), fraudsters linked stolen debit cards to thousands of new Polymarket US accounts to place bets. They then used a method of withdrawing the resulting profits to legitimate cards or accounts they controlled. The amount of money fraudsters attempted to launder through the platform indirectly totaled at least $10 million.

Payment processor Checkout.com first detected signs of unusual transactions in February and warned the company. At that time, more than 80% of incoming deposit transactions were classified as suspicious fraud and rejected. This was an abnormal surge, considering that the typical industry fraud transaction rate is about 1%.

The management's complacent initial response also came under fire. According to a Wall Street Journal (WSJ) report, compliance practitioners reported the seriousness of the situation to CEO Shayne Coplan, who reportedly replied, "Continue to grow the platform, and if regulators catch it, we'll just pay the fine." When complaints about platform withdrawal delays flooded in, it was revealed that even the anti-money laundering (AML) safeguard, which allowed withdrawals only to the payment method used for deposits, was disabled.

Subsequently, internal turmoil continued, with Chief Compliance Officer (CCO) Andrew Clifford resigning and Justin Hertzberg, head of the US entity, being dismissed. Polymarket stated that it reviewed regulatory compliance through a law firm and implemented security enhancement measures, such as reducing the card linking limit per account.

[Article Key Summary]

-A fraud attempt to launder at least $10 million using stolen debit cards on Polymarket was detected.

-Internal disclosures revealed that the CEO prioritized expansion, exacerbating the situation, despite the payment processor's approval rejection rate exceeding 80%.

-Key executives were largely replaced due to lax security management, including disabling the same-method refund principle to resolve withdrawal delays.

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