Fraudsters attempted to steal $10 million from Polymarket using stolen debit cards, while Kalshi faces accusations of inflating trading volumes.
Fraudsters have attempted to embezzle at least $10 million from Polymarket by utilizing stolen debit cards to fund accounts, execute trades, and withdraw funds to accounts they controlled, according to reports.
The fraudulent activities reportedly started in February and focused on around seven accounts, with one account attempting approximately 4,000 deposits. Checkout.com, Polymarket's payment processor, flagged over 80% of these deposits as fraudulent, significantly higher than the industry average of 1%.
As a response to the surge in suspicious activity, Polymarket faced delays in processing withdrawals for normal customers. To expedite transactions, the platform allowed faster transfers of funds, although this typically complicates withdrawals made through stolen cards. Concerns were raised internally about the potential for increased fraud and money laundering due to this policy change, although management maintained that other safeguards were sufficient.
In response to the situation, Polymarket limited the number of debit cards that could be associated with a single account. By May, the rate of fraudulent transactions fell back to industry norms. A spokesperson for Polymarket confirmed the company's collaboration with regulators and law enforcement, noting that an audit by Sullivan & Cromwell validated compliance with regulatory standards.
In late July, another incident emerged where criminals exploited stolen personal information to access the accounts of nearly 500 clients, despite not knowing their usernames or passwords. Polymarket has committed to compensating those affected.
Kalshi Faces Allegations of Manipulating Trading Volumes
In a separate issue, a trader known as Beni accused Kalshi of inflating its cryptocurrency trading volumes. Citing a perpetual futures contract on Ethereum, Beni claimed that despite an open interest of about $3.1 million, the daily turnover was approximately $538.6 million.
Beni expressed his frustrations on social media, accusing Kalshi of faking their crypto volume and asserting that the company treats its customers poorly.
Beni pointed to Kalshi's incentive program for perpetual contracts, which offers a rebate on taker fees, suggesting that the low transaction values could lead to inflated trading volumes. However, Kalshi’s policies specifically exclude self-trading and wash trades from eligibility for rewards, asserting their right to deny payments if violations are detected.
Kalshi's cryptocurrency division leader, known as IcoBeast, refuted the claims, explaining that the criticism conflated different products and that the data referenced pertained to prediction markets, not perpetual futures. He emphasized that no rewards program exists for cryptocurrency contracts linked to event outcomes.
As of September 21, there have been no official findings from the CFTC regarding the allegations against Kalshi, and the claims made by Beni are based on his personal estimates without confirming evidence of fictitious trading.
In June, an investigation by the Wall Street Journal revealed that Polymarket had compensated content creators for promoting fake bets and winnings on imitation sites, raising further concerns about the platform's integrity.
