Hassan Maishera
TL;DR
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Paxful crypto platform has been fined $4 million as it profited from moving money for criminals.
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The DoJ said Paxful’s founders even referred to the growth driven by such activity as the “Backpage Effect.”
Paxful to Pay a $4M Fine for Helping Criminals to Move Money
Paxful Holdings Inc. has been fined $4 million after prosecutors say the cryptocurrency trading platform profited from the absence of anti-money laundering controls that allowed criminals to move illicit funds tied to fraud, prostitution, and sex trafficking.
According to the statement released by the Department of Justice on Wednesday, the prosecutors accused Paxful of knowing that its customers transferred funds from crimes, like prostitution,
Assistant Attorney General A. Tysen Duva of the Justice Department’s criminal division stated that,
“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.”
The prosecutors added that Paxful also knew it was transferring crypto for its customers, including Backpage. Backpage is a website often used by traffickers to post ads for prostitution, which includes minors.
The DoJ statement revealed that between 2015 and 2022, Paxful's business with Backpage and another similar site saw roughly $17 million worth of bitcoin being transferred from a Paxful wallet to Backpage and the other site. Paxful then got at least $2.7 million in profits, the prosecutors added.
The DoJ added that Paxful’s founders even referred to the growth driven by such criminal activity as the “Backpage Effect.”
This latest development comes after Artur Schaback, Paxful's co-founder, in 2024, pleaded guilty to operating a cryptocurrency exchange without effective anti-money laundering policies, potentially facing up to five years in prison.
The crypto platform temporarily shut down its operations in 2023 following a misunderstanding between the co-founders.
In its statement, the DoJ stated that Paxful was originally asked to pay over $112 million but didn’t have the money. The company couldn’t pay a criminal penalty greater than $4 million, the DoJ concluded.
