The US Department of Justice (DOJ) has ordered Paxful to pay $4 million after the company admitted to conspiring to promote illegal prostitution and transmit funds derived from criminal activity.
According to court documents, Paxful failed to enforce basic know-your-customer and anti-money laundering rules and ignored clear signs of criminal behavior on its platform. The company also submitted false compliance policies to regulators.
Investigators found that Paxful enabled nearly $17 million in Bitcoin transfers connected to Backpage and similar sites, which were widely known for hosting illegal prostitution ads, including cases involving minors, and facilitated millions of illicit trades over several years.
These activities generated substantial profits for the company. From 2015 to 2023, the platform processed more than 50 million trades valued at over $3 billion.
Federal investigators determined it handled more than $500 million in suspicious transactions linked to ransomware attacks, darknet marketplaces, and sanctioned entities.
Prosecutors said Paxful’s cooperation during the investigation helped reduce the penalty, but emphasized that the case demonstrates heightened scrutiny of crypto platforms involved in financial crime.
The ruling follows a long-running federal investigation into the platform, which was established in 2015 by Ray Youssef and Artur Schaback as the “People’s Marketplace,” with a focus on unbanked individuals in emerging markets.
Operating mainly as a peer-to-peer Bitcoin marketplace, Paxful’s rapid growth was fueled in part by the “Backpage Effect,” attracting users blocked from other services because of lax KYC requirements.
By 2023, disputes between the founders escalated into lawsuits and public accusations of misconduct, leading to the abrupt suspension of operations in April 2023, with the company later resuming under court supervision.
Schaback entered a guilty plea in July 2024 for conspiracy to fail to maintain an effective anti-money laundering program.
Source: https://cryptobriefing.com/crypto-platform-sentencing-paxful/
