The United States Department of Justice has ordered peer-to-peer cryptocurrency marketplace Paxful to pay a fine of $4 million for criminal conduct involving failure to implement proper anti-money laundering checks.
- Paxful was fined $4 million after pleading guilty to facilitating illicit transactions and failing to implement anti-money laundering controls.
- The DOJ said the platform moved $17 million in Bitcoin to illegal sites, including Backpage, generating $2.7 million in profits.
A statement released by the DOJ, Paxful has pleaded guilty to multiple federal charges, including conspiracy to violate the Travel Act by promoting illegal prostitution and operating an unlicensed money transmitting business, and knowingly dealing with funds sourced from illicit means.
“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,” Assistant Attorney General A. Tysen Duva was quoted as saying.
The total criminal penalty was initially calculated at $112.5 million, but the amount was reduced after prosecutors determined the firm did not have the financial capacity to pay in full, resulting in a final fine of $4 million.
Paxful initially suspended services back in April 2023 but resumed operations shortly after, before permanently shutting down in late 2025.
Before closing, the company said in a blogpost that it was no longer able to sustain the high costs of “compliance remediation” and the legal fallout from the “historic misconduct” of the original co-founders, Ray Youssef and Artur Schaback, prior to 2023.
Paxful profited from its illicit activities
According to the DOJ, between December 2015 and December 2022, Paxful served as a primary payment conduit for the classified advertising site Backpage and other “copycat” sites.
Prosecutors established that approximately $17 million in Bitcoin was funneled through Paxful to these illegal platforms, generating millions in profits for the company while it ignored blatant signs of criminal activity.
“Paxful obtained at least $2.7 million in profits,” the DOJ said.
Paxful founders were even accused of boasting about the ‘Backpage Effect,’ which they claimed “enabled the business to grow.”
Further, the complaint alleges that Paxful and its founders touted the platform as one that requires know-your-customer information even while knowing that many of its customers were engaged in suspicious and criminal activity.
“Paxful knew it was used as a vehicle for prostitution, fraud, romance scams and extortion schemes,” the DOJ said.
Schaback pleaded guilty in July 2024 to conspiracy to willfully fail to maintain an effective AML program and received a maximum penalty of five years in prison following a plea agreement. Youssef stepped down in April 2023 following a public fallout and has since distanced himself from the company’s legal troubles.
