Axiom’s Insider Trading Scandal Spills Into Prediction Markets
Axiom’s Insider Trading Scandal Spills Into Prediction Markets – Moby Alleged crypto insiders didn’t just trade on private information — they may have bet on getting caught. Blockchain investigator ZachXBT’s latest report accuses employees at Axiom Exchange of abusing sensitive user wallet data to profit from meme-coin trades. But the scandal doesn’t stop there. According…
Axiom’s Insider Trading Scandal Spills Into Prediction Markets – Moby
Alleged crypto insiders didn’t just trade on private information — they may have bet on getting caught.
Blockchain investigator ZachXBT’s latest report accuses employees at Axiom Exchange of abusing sensitive user wallet data to profit from meme-coin trades. But the scandal doesn’t stop there. According to the report, several wallets placed sizable bets on prediction markets anticipating which company ZachXBT would expose, with unusual volumes flowing into wagers on Axiom shortly before the reveal.
If insiders were indeed betting on the public fallout of their own misconduct, the implications stretch far beyond crypto. The episode raises uncomfortable questions for prediction platforms like Polymarket and Kalshi, which now face mounting pressure to prove they can detect and prevent a new, more complex form of insider trading, one where the market isn’t just the vehicle, but the second payoff.
The allegations trace back to Axiom Exchange, a fast-rising crypto trading platform founded in 2024 by Henry Zhang and Preston Ellis, known as Mist and Cal.
Axiom, a Y Combinator alum, quickly became one of the most profitable companies in the sector. According to ZachXBT’s report, the platform has generated more than $390 million in revenue to date, capturing roughly 63% of the meme coin market over that period, per Dune Analytics.
The report centers on Broox Bauer, one of multiple employees who allegedly exploited weak internal controls to access sensitive user information, including private wallet details and trading activity. Using that information, Bauer and others are accused of placing trades on decentralized exchanges on Solana rather than through Axiom itself. There is no evidence that the company’s founders were aware of or involved in the alleged misconduct.
Still, allegations such as these aren’t all that unusual in the Wild West of crypto. President Trump and his family members are involved in meme-coins like $TRUMP and $MELANIA, and the Administration has tied its crypto dealings into an access-based foreign policy circus.
The Axiom situation isn’t just damning for crypto. It also involves prediction markets like Polymarket. These markets were, according to ZachXBT’s report, weaponized for a second layer of insider trading, though no bets were made on Kalshi, a Polymarket competitor, however.
Ironically, the culprits likely netted more profit betting on their own exposure on prediction markets than they did from the original crime, per the report. When ZachXBT posted about the allegations, betting immediately flew up on both Kalshi and Polymarket based on the outcome of the report before it even dropped.
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They ranged from “Which crypto company will ZachXBT expose for insider trading?” to bets on individuals who will actually be implicated. Volume hit anywhere from $23 to 38 million overall, with several wallets placing massive “Yes” bets on, you guessed it, Axiom, shortly before the reveal. Many of these wallets were entirely new or “fresh,” with some older accounts as well, but it’s safe to say these were not legitimate bets and may very well be the same insiders being accused of…insider trading.
One of the biggest wallets (predictorxyz, possibly linked to Axiom’s Bauer in unconfirmed rumors) bet ~$65,800 at ~13.8% odds and made approximately $411,000-plus. Another wallet bet ~$200,000 and profited $300,000–$ 420,000. According to the numbers, alleged insider-linked profits on Polymarket ranged from $700,000 to $1.5 million. And this is across multiple wallets, with some reports claiming 15+ fresh accounts placed bets of up to $200,000, the exact kind of movement the Axiom insiders were making via the exchange.
All of this is another dismal look for platforms like Polymarket, and Kalshi — though not involved in this particular incident — may get swept up, too
Both companies are reportedly eyeing IPOs this year. But these trading issues pose a systemic legitimacy crisis to prediction markets in general. If these platforms can’t police their own participants from betting on their own downfalls, how is a public listing remotely feasible? As of now, there is no smoking gun linking insiders to the bets, but that’s precisely the point: the mechanisms to track and prevent this type of self-dealing do not exist.
We are living through the Wild West era of prediction markets, and Polymarket looks like the most lawless frontier. Between the two, Kalshi is emerging as the adult in the room. By taking proactive steps to ban high-profile bad actors and by cooperating with regulators, Kalshi is positioning itself as the only platform that might actually survive the gauntlet of legal requirements required to go public.
Just this week, Kalshi suspended a MrBeast YouTube editor for trading about $4,000 on video content markets. Kalshi tracked and banned the editor, Artem Kaptur, solely based on material non-public information, taking a page out of the Nasdaq and New York Stock Exchange’s playbook. Zooming out, Kalshi seems to be following its Bitcoin and crypto counterparts, adapting to the system’s rules rather than trying to change them entirely.
Kalshi is also very buddy-buddy with the Commodity Futures Trading Commission (CFTC), the sector’s chief regulator. And it’s not just talk either. The company is involved in over 200 investigations into potential violations, primarily insider trading, and recently announced a surveillance system called “Poirot,” a “real-time detection of suspicious patterns using pattern recognition models,” probably with AI.
They’ve also partnered with Solidus Labs for advanced behavioral monitoring and expert, Daniel Taylor, the director of the Wharton Forensic Analytics Lab. Polymarket doesn’t appear to be making similar moves, so its enforcement seems to amount to show.
If these prediction markets are going to have a future and a place in the public market, they will have to play ball, and Kalshi appears to be doing so in spades.
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