Crypto Platform Paxful Fined $4M for AML Violations

Paxful Holdings Inc., a well-known peer-to-peer bitcoin trading platform, will pay a $4 million criminal penalty after pleading guilty to several federal offenses. The United States Department of Justice (DOJ) announced the outcome today via a press release.

The disclosure detailed how Paxful’s intentional disregard for compliance facilitated billions in illegal transactions. The platform handled over 26.7 million trades worth nearly $3 billion and generated $29.7 million in revenue from January 2017 to September 2019.

The case shows that the U.S government is paying more attention to crypto platforms that prioritize rapid growth while neglecting their legal responsibilities.

Violations and Operational Failures

Paxful admitted to conspiring to violate the Travel Act by facilitating bitcoin payments that promoted illegal prostitution through interstate commerce, including transfers to Backpage.com for commercial sex advertisements. It also pleaded guilty to operating an unlicensed money transmitting business that handled proceeds from a wide range of predicate crimes.

The most significant charge centered on willful violation of the Bank Secrecy Act: the platform failed to establish or maintain any meaningful anti-money laundering program. Know-your-customer procedures were never properly implemented, suspicious activity reports were not filed despite clear red flags, and internal policies existed only on paper.

Additionally, Paxful processed routine transactions involving high-risk jurisdictions such as Iran and North Korea, thereby further breaching sanctions regimes. Co-founder and former chief technology officer Artur Schaback separately pleaded guilty in July 2024 to conspiracy to violate AML requirements, reflecting leadership awareness of the problems.

Court Grants Paxful a Reduced Fine

The initial sentencing guidelines suggested a potential penalty of $112.5 million. However, the court eventually set a significantly lower fine of $4 million after the Justice Department concluded that Paxful lacked the financial capacity to pay a higher sum. Paxful was fined $3.5 million in a similar case in December 2025.

Although the platform initially withheld details of the misconduct, it later opted to cooperate with investigators, providing crucial information and implementing necessary corrective actions. This resolution highlights the government’s determination to hold crypto intermediaries accountable for enabling serious criminal activities.

It also serves as a clear warning to other peer-to-peer platforms. The warning is that failing to establish basic compliance measures can lead to criminal liability, the prosecution of executives, and significant financial penalties, even for companies with limited resources.

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