Polymarket CEO Shayne Coplan told his employees to ignore fraud issues with a payment provider in order to keep the company growing, according to the Wall Street Journal.
In February, customers were complaining on Discord about how long it took to withdraw funds on Polymarket, which returned to the U.S. last December. Coplan wanted to reduce friction on the platform, and users getting their money was at the top of their list, according to the WSJ report published Saturday evening.
That same month, Checkout.com was attacked by seven users who put in thousands of fraudulent claims with Polymarket, including 4,000 by one user alone. Instead of tightening up security factors to protect from attacks, company leadership decided to get rid of a rule requiring withdrawals be sent to the same source as the deposit despite warnings from employees that could open the door to potential money laundering, according to the WSJ.
Coplan’s response “floored” his compliance team: keep growing and pay a fine if regulators ever find out. Chief Compliance Officer Andrew Clifford resigned in April, sending a report of the fraud issues to executives on his way out.
Polymarket fraud rates back down
By May, fraud rates returned to the industry norm on Polymarket, but the issue led to many staff changes. The U.S. CEO Justin Hertzberg was fired and the heads of regulation and anti-money-laundering from the U.S. left.
The fraud was brought back to normal partly by limiting the number of debit cards that could be linked to an account and the onboarding of a new antifraud contractor. Fraud rates remained elevated until those changes in May, though they never hit the high of 80% fraudulent deposits seen in February.
The response to push through for the sake of growth is not the norm in the commodities or gambling worlds, multiple sources told the WSJ.
“In the regulated space, this kind of thing does not happen,” said former CFTC enforcement lawyer Joe Konizeski. “You have adults who handle customer funds and make sure they’re sourced appropriately and handled appropriately.”
Eyeing potential IPO next year
Growing the platform is important for many reasons, including how much money the company is worth.
Coplan is “in the process” of raising $1 billion right now at a valuation of around $21 billion, the WSJ reports. The company is working to reposition itself as a more mature company with responsible growth in mind and has added risk-management staff and improved compliance protocols as well as overall testing.
Donald Trump Jr.’s 1789 Capital is already invested to the tune of around $200 million and is reportedly adding another $300 million in the latest round. Coplan visited 1789 co-founder Omeed Malik over the summer about how to “professionalize” Polymarket before a possible IPO in 2027.
One of the suggestions was to hire experienced executives. Polymarket then added its first CFO in Warren Jenson, a former Amazon CFO.
