DOJ fines Paxful $4M over AML failures tied to trafficking, fraud
The United States Department of Justice said Wednesday that peer-to-peer crypto exchange Paxful has been ordered to pay $4 million after the company pleaded guilty in December to conspiring to promote illegal prostitution, knowingly transmitting criminal proceeds, and violating anti-money laundering requirements.
The Justice Department said Paxful agreed that the appropriate criminal penalty was $112.5 million, but prosecutors determined the company could not pay more than $4 million.
“Paxful profited from moving money for criminals that it attracted by touting its lack of anti-money laundering controls and failure to comply with applicable money-laundering laws, all while knowing that these criminals were engaged in fraud, extortion, prostitution and commercial sex trafficking,” said Andrew Tysen Duva, the assistant attorney general of the Justice Department’s Criminal Division.
Prosecutors said that from January 2017 to September 2019, Paxful facilitated over 26 million trades worth nearly $3 billion in value and collected more than $29.7 million in revenue.
Source: Criminal Division
Paxful profits linked to illicit advertising
The Justice Department said Paxful marketed itself as a platform that did not require customer information and presented anti-money laundering policies that it knew “were not implemented or enforced.”
According to prosecutors, one of Paxful’s customers was the classified advertising platform Backpage, which authorities shut down for hosting ads related to illegal prostitution. “Paxful’s founders boasted about the ‘Backpage Effect,’ which enabled the business to grow,” the Justice Department said, adding that Paxful’s collaboration with Backpage and a similar site between 2015 and 2022 generated $2.7 million in profits.
Paxful shut down its operations in November and, in an October blog post that was later removed, said the decision stemmed from “the lasting impact of historic misconduct by former co-founders Ray Youssef and Artur Schaback prior to 2023, combined with unsustainable operational costs from extensive compliance remediation efforts.”
Youssef said in response that the company “should have closed down when I left the company two years ago.”
Schaback, the firm’s former chief technology officer, pleaded guilty in July 2024 to conspiring to fail to maintain an effective anti-money laundering program.
He is awaiting sentencing, with a California judge agreeing in December to move his hearing from January to May, as prosecutors said he is continuing to provide information to the government’s investigation into Paxful, “which may bear on the government’s sentencing recommendation.”
U.S. authorities have not publicly named or charged Youssef in connection with Paxful.
Stay informed, read the latest news right now!
Disclaimer
The content on TrustsCrypto.com is for informational purposes only and does not constitute financial or investment advice. Cryptocurrency markets are highly volatile, always do your own research before making decisions.
Some content may be assisted by AI and reviewed by our editorial team, but accuracy is not guaranteed. TrustsCrypto.com is not responsible for any losses resulting from the use of information provided.
