Paxful was ordered to pay a $4 million fine after admitting it enabled criminal transactions.
Prosecutors said Paxful ignored anti money laundering laws to grow its platform.
Paxful processed $3 billion in trades while criminals moved illicit funds.
Paxful Holdings Inc. was ordered to pay a $4 million criminal fine after admitting it allowed illegal money to move through its platform. US prosecutors said the company knowingly profited from users involved in fraud, prostitution, and trafficking. The Department of Justice confirmed the sentence after Paxful pleaded guilty in December. Authorities said the exchange ignored anti-money laundering duties while attracting high-risk customers.
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Prosecutors said Paxful marketed itself as a platform with limited identity checks. The company promoted that approach to draw more users. However, investigators found that executives understood criminals used the service. Despite that knowledge, Paxful continued to process transactions.
Between January 2017 and September 2019, Paxful handled more than 26 million trades. Those trades reached nearly $3 billion in value. During that period, the company earned over $29.7 million in revenue. Prosecutors said some of that income came from illegal activity. In December, Paxful was fined $7.5 million for its illegal cryptocurrency transactions and compliance failures.
DOJ Details Criminal Conduct
The Justice Department said Paxful was aware of transmitting money that was acquired through crime. Besides this, prosecutors discovered that Paxful did not have an efficient anti-money laundering program. The company had written policies that were not reflected in reality.
Investigators said Paxful attracted customers by highlighting weak compliance standards. As a result, criminals used the platform to move funds with little resistance. Prosecutors determined that Paxful placed growth and revenue ahead of regulatory compliance. Therefore, authorities pursued criminal charges.
The Justice Department initially set a criminal penalty of $112.5 million. However, officials reviewed Paxful’s finances and concluded the company could not pay that amount. Consequently, the court imposed a reduced $4 million fine. Prosecutors said their independent financial analysis supported that decision.
Links to Backpage and Illicit Profits
Prosecutors identified Backpage as one of Paxful’s customers. Authorities shut down Backpage after linking it to illegal prostitution activity. Investigators reported that Paxful handled bitcoin transfers, which were related to Backpage and one other such site.
Paxful wallets transferred approximately $17 million of bitcoin into those platforms between 2015 and 2022. Consequently, Paxful made at least $2.7 million of profits out of those transactions. Prosecutors also said company founders referenced growth linked to such transactions.
Authorities concluded that Paxful’s weak oversight allowed criminal networks to operate. They said the company understood the risks connected to those transfers. Nevertheless, Paxful continued to facilitate the activity.
Founder Guilty Plea and Ongoing Cooperation
Paxful's former chief of technology officer and co-founder Artur Schaback pleaded guilty in July 2024. He acknowledged that he was not able to develop and sustain a successful anti-money laundering program. Prosecutors further alleged that he lied to users regarding know-your-customer requirements.
Schaback now awaits sentencing in California. A judge moved his sentencing hearing from January to May. Prosecutors said he continues to cooperate with the government’s investigation. That cooperation may influence his final sentence.
US authorities have not charged co-founder Ray Youssef in this case. In the meantime, Paxful shut down in November due to its previous malpractices and increased compliance expenses. Regulators are still going after crypto companies that do not comply. Earlier in 2025, BitMEX was fined $100M by a US court for failing AML rules and KYC requirements over five years.