On February 12, the U.S. Department of Justice announced a $4 million fine against peer-to-peer encryption platform Paxful. The company previously admitted that, lacking anti-money laundering and customer due diligence mechanisms, it had long transferred funds for criminals and profited directly from these activities. The related funds are alleged to be connected to human trafficking, scams, extortion, and illegal prostitution activities.
Prosecutors disclosed that between January 2017 and September 2019, Paxful facilitated over 26 million transactions totaling nearly $3 billion, earning approximately $29.7 million in revenue. The Department of Justice pointed out that the company had promoted its platform as “no identity verification required” and published anti-money laundering policies that were not actually implemented, thereby attracting high-risk customers.
Investigations revealed that Paxful had partnerships with the seized illegal classified ad website Backpage and similar platforms. The U.S. Department of Justice stated that its founder privately boasted that the “Backpage effect” drove platform growth. Between 2015 and 2022 alone, such collaborations generated about $2.7 million in profit for the platform.
Initially, prosecutors believed a fine of $112.5 million was appropriate, but considering the company’s cessation of operations and inability to pay, the final penalty was set at $4 million. Paxful shut down at the end of 2025. The company attributed its collapse in a statement to misconduct by former management and high compliance remediation costs.
Former co-founder Ray Youssef responded that the platform had fallen into an irreversible crisis before his departure. Another co-founder and former CTO, Artur Schaback, admitted in 2024 to conspiracy for failing to maintain an anti-money laundering system and is currently awaiting sentencing.
This case is seen as another landmark event in the U.S. strengthening enforcement of crypto compliance, sending a clear signal to the industry: platforms that ignore anti-money laundering obligations will face dual pressure from criminal and regulatory authorities.
Disclaimer: The information on this page may come from third parties and does not represent the views or opinions of Gate. The content displayed on this page is for reference only and does not constitute any financial, investment, or legal advice. Gate does not guarantee the accuracy or completeness of the information and shall not be liable for any losses arising from the use of this information. Virtual asset investments carry high risks and are subject to significant price volatility. You may lose all of your invested principal. Please fully understand the relevant risks and make prudent decisions based on your own financial situation and risk tolerance. For details, please refer to
Disclaimer.
Related Articles
Brazil Bans Polymarket, Kalshi, 26 Other Prediction Platforms
Brazil has enacted a sweeping ban on prediction markets and betting platforms, according to local media and government filings. The two leading prediction markets, Polymarket and Kalshi, were confirmed inaccessible to researchers based in the country, with the Banco Central do Brasil publishing a fo
CryptoFrontier14m ago
Justin Sun Skips Trump Memecoin Event Amid Legal Dispute with World Liberty
Gate News message, April 26 — Justin Sun, one of the largest investors in the TRUMP token, notably did not attend a memecoin-themed event hosted by US President Donald Trump at Mar-a-Lago in Florida this year, marking a significant shift from his prominent appearance at a similar event last year.
T
GateNews1h ago
U.S. Military Confirms Bitcoin Node Operations as Multiple Nations Adopt Crypto for Statecraft
Gate News message, April 26 — Admiral Samuel Paparo, Jr., who leads U.S. forces across the Indo-Pacific, told a Senate panel that Bitcoin matters to national security. The Pentagon is running its own Bitcoin node and conducting operational tests to secure and protect networks using the Bitcoin
GateNews2h ago
Tennessee Bans Crypto ATMs Statewide, Second State After Indiana
Tennessee has become the second U.S. state to outright ban crypto ATMs, with Governor Bill Lee signing House Bill 2505 into law on April 13, 2024, after it passed both chambers unanimously. The ban will take effect July 1, 2024, and makes it a misdemeanor to operate or host the machines anywhere in
CryptoFrontier3h ago
DOJ Drops Criminal Investigation Into Powell, Clearing Path for Crypto-Friendly Warsh to Lead Fed
Gate News message, April 26 — The U.S. Department of Justice has dropped its criminal investigation into Federal Reserve Chair Jerome Powell, clearing the way for the Senate to confirm Kevin Warsh as the incoming central bank chair. U.S. Attorney for the District of Columbia Jeanine Pirro
GateNews4h ago
U.S. Sanctions Iran-Linked Crypto Wallets, Tether Freezes $344 Million USDT
Gate News message, April 26 — The U.S. federal government sanctioned multiple wallets linked to Iran on April 25, with Treasury Secretary Scott Bessent announcing the action as part of efforts to increase economic pressure on the country amid an ongoing ceasefire. The sanctions came a day after
GateNews5h ago
