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
U.S. CFTC Chairman Announces "New Blueprint for Cryptocurrency Regulation": Collaborates with SEC to Launch Project Crypto, Bringing Clear Regulations to DeFi and Prediction Markets
The Chairman of the U.S. Commodity Futures Trading Commission (CFTC), Mike Selig, announced that he will promote a regulatory framework for decentralized finance (DeFi), crypto derivatives, and prediction markets. The CFTC will collaborate with the U.S. Securities and Exchange Commission (SEC) to end a long-standing regulatory dispute, providing legal clarity for the crypto industry. This marks the United States regaining its leadership in digital assets and offers compliance opportunities in related fields.
動區BlockTempo27m ago
The U.S. SEC will deepen coordination with the CFTC, including holding joint meetings and company reviews.
Gate News Announcement, March 10th, U.S. Securities and Exchange Commission (SEC) Chairman Paul Atkins stated that the SEC will deepen coordination with the Commodity Futures Trading Commission (CFTC), including joint meetings and company reviews.
GateNews1h ago
U.S. Democratic lawmakers will introduce a bill on March 11th to ban trading contracts related to war and death events.
Gate News Announcement: On March 10th, U.S. Democratic lawmakers will introduce a bill on March 11th to explicitly prohibit trading contracts related to events involving war and death.
GateNews3h ago
Justin Sun Reaffirms Zero-Tolerance Policy on Illegal Activities at Tron
TRON founder Justin Sun says his companies maintains zero tolerance against illegal activities like embezzlement, unauthorised computer access and bribery.
He threatened legal action against those who spread false rumors online and ‘smear judicial organs’ just days after two of his companies
CryptoNewsFlash4h ago
U.S. Senator: Stablecoin "Clear Act" requires compromise from all parties to advance, currently working on a middle-ground solution
Senator Alsobrooks stated at the Washington American Bankers Association Summit that in order to advance the Stablecoin Regulation Act, the "Clear Act," all parties need to compromise, emphasizing that the overall goal is more important than perfection. She is working with Senator Tillis to seek a balanced solution that protects deposits and promotes innovation.
GateNews5h ago
The first in the U.S.! Florida's "Stablecoin Bill" passes successfully, and the government will accept stablecoin payments
Florida passes the first state-level stablecoin regulation bill in the United States, SB 314, bringing stablecoins into the money services regulatory framework. The bill requires issuers to obtain licenses and adhere to relevant consumer protection and anti-money laundering measures, helping to reduce compliance risks and laying the foundation for the legalization of digital assets. Florida also plans to pilot government agency acceptance of stablecoin payments, demonstrating its innovative leadership in the digital economy.
区块客5h ago
