Paxful — P2P platform — was ordered to pay a fine of 4 million USD after admitting to knowingly profiting from servicing clients linked to crime. The prosecution claims that the exchange advertised itself as a place without KYC, and the AML policy was practically 'on paper', with no real implementation and enforcement.
According to the DOJ, funds linked to fraud and the illegal sex services market were said to flow through the platform. Andrew Tysen Duva, Deputy Attorney General in the Criminal Division, stated outright that Paxful was attracting criminals by signaling a lack of AML controls.
Investigators found that from January 2017 to September 2019, Paxful facilitated over 26 million transactions worth nearly 3 billion USD, generating approximately 29.7 million USD in revenue.
The DOJ also stated that the company agreed to a penalty of around 112.5 million USD, but it was ultimately determined that Paxful is unable to pay more than 4 million USD.
Backpage and the thread of 'high-risk' clients
The prosecution indicated that among Paxful's clients was, among others, the Backpage service, which was shut down in the USA due to advertisements related to illegal prostitution. According to the DOJ, cooperation with Backpage and similar entities brought Paxful about 2.7 million USD in profit from 2015 to 2022.
In the background, there is also the thread of co-founder and former CTO, Artur Schaback, who in July 2024 admitted to charges related to deficiencies in the approach to combating money laundering and is awaiting sentencing.