Paxful Holdings Inc. agreed to plead guilty to federal charges, accepting a joint multimillion-dollar fine to Paxful of 7.5 million dollars following official investigations. According to the Department of Justice, the platform knowingly facilitated money laundering and other global illicit activities.
The total sanction is divided between a 4 million dollar criminal penalty and a 3.5 million civil one imposed by FinCEN. The company processed approximately 3 billion dollars in commercial operations between the years 2017 and 2019. Likewise, it generated over 29 million dollars in revenue allowing dubious transactions without applying the necessary controls.
On the other hand, authorities revealed that the platform served as a conduit for financial flows to illegal prostitution sites and sanctioned countries. Specifically, nearly 17 million dollars moved towards Backpage and similar platforms, profiting from exploitation. Furthermore, they processed over 500 million dollars related to suspicious activities in nations like Iran and Venezuela.
Matthew R. Galeotti, from the Department of Justice, stated that Paxful attracted criminals by promoting its lack of anti-money laundering controls. In this way, the company deliberately decided not to identify its customers, favoring fraudsters and money launderers.
To what extent did corporate negligence fuel global criminal activities?
The platform’s founders allegedly celebrated their business growth driven by what they internally termed the “Backpage Effect.” Despite being aware of the criminal conduct, Paxful failed to file suspicious activity reports required by law and misrepresented its policies to third parties. This systematic omission allowed malicious actors to use the infrastructure to evade international sanctions.
Moreover, this plea agreement arises months after Artur Schaback, co-founder and former CTO, admitted his criminal responsibility. In July 2024, Schaback pleaded guilty to charges arising from the same scheme, evidencing a culture of non-compliance within the top management. The platform, which shuttered operations in 2023, operated allowing the exchange of cryptocurrencies for gift cards and fiat money.
What legal consequences do executives face after this judicial agreement?
Although the fine calculated under applicable sentencing guidelines amounted to 112.5 million dollars, the government adjusted the final figure. The Department of Justice determined that Paxful could reasonably pay only 4 million dollars as a criminal penalty due to its current financial situation. However, this does not exempt the company from additional civil responsibilities imposed by financial regulators.
Finally, the company received some credit for cooperating with investigators and implementing remedial measures after terminating the responsible leadership. Formal sentencing is scheduled for February 10, 2026, marking the close of a dark compliance chapter in the history of peer-to-peer exchanges.
