Paxful Pays $4M Fine After Guilty Plea to Money Laundering

Paxful Holdings Inc. received a $4 million criminal penalty following its guilty plea to multiple federal charges. The peer-to-peer cryptocurrency trading platform admitted to promoting illegal prostitution, violating the Bank Secrecy Act, and knowingly transmitting funds from criminal offenses.

Virtual Asset Trading Platform Sentenced for Violating the Travel Act and Other Federal Criminal Charges https://t.co/Orm3CQMqgP

— Criminal Division (@DOJCrimDiv) February 11, 2026

The Justice Department announced the sentencing on charges stemming from Paxful’s operations between 2015 and 2022. The platform processed nearly $3 billion in trades while deliberately avoiding anti-money laundering compliance requirements.

Assistant Attorney General A. Tysen Duva stated the company profited by marketing its lack of anti-money laundering controls. Criminals exploited the platform for fraud, extortion, prostitution, and commercial sex trafficking operations.

U.S. Attorney Eric Grant for the Eastern District of California emphasized accountability. He warned that companies turning a blind eye to criminal activity will face serious consequences under U.S. law.

Paxful Enabled Backpage Transactions

Court documents revealed Paxful knowingly transferred virtual currency for Backpage, the notorious online advertising platform for illicit prostitution. Backpage and its operators previously admitted to advertising illegal sex work, including content depicting minors.

Paxful’s founders reportedly boasted about the “Backpage Effect” that fueled business growth. Between December 2015 and December 2022, nearly $17 million in bitcoin flowed from Paxful wallets to Backpage and copycat sites.

The company earned approximately $2.7 million in profits from these transactions alone. From January 2017 to September 2019, Paxful facilitated over 26.7 million trades and collected more than $29.7 million in revenue.

According to the plea agreement, Paxful marketed itself as a platform not requiring know-your-customer information. The company allowed accounts to open without proper verification and presented fake AML policies to third parties.

Meanwhile, Paxful failed to file suspicious activity reports despite clear evidence of criminal conduct. The platform became a vehicle for money laundering, sanctions violations, fraud, romance scams, and extortion schemes.

Co-Founder Also Pleaded Guilty

Artur Schaback, Paxful’s co-founder and former chief technology officer, pleaded guilty on July 8, 2024. The 36-year-old Estonian national admitted to conspiracy to fail to maintain an effective anti-money laundering program.

Schaback faces a maximum penalty of five years in prison at his November 4 sentencing. He also agreed to resign from Paxful Inc.’s Board of Directors as part of the resolution.

The Justice Department determined Paxful owed $112.5 million based on sentencing guidelines. However, independent analysis showed the company could only pay $4 million, resulting in the reduced penalty.

Paxful received credit for cooperating with investigators after the case began. The company produced extensive documentation, provided timely updates, and implemented remedial measures during the investigation.

Special Agent in Charge Linda Nguyen of IRS Criminal Investigation stated the sentencing underscores commitment to accountability. She noted Paxful’s deliberate disregard enabled illicit fund movement at scale.

The prosecution involved coordination between multiple federal agencies. Homeland Security Investigations and IRS Criminal Investigation led the case alongside the Justice Department’s Money Laundering and Asset Recovery Section.

Following this resolution, Paxful also reached a coordinated settlement with the Financial Crimes Enforcement Network. The case marks a significant enforcement action in the cryptocurrency compliance space.