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
Nevada judge extends ban on Kalshi, rejects event contract defense
A Nevada judge has reportedly extended a ban preventing Kalshi from offering event-based contracts in the state, ruling that the products constitute unlicensed gambling under state law.
Judge Jason Woodbury said at a hearing in Carson City on Friday that he will grant a preliminary injunction
Cointelegraph4h ago
Prediction: the market platform will accelerate its expansion in Asia; regulatory gray areas are the biggest challenge for further growth
Polymarket and PredicXion are expanding into Asian markets and launching Chinese-language support to drive localization. However, countries such as China and India lack clear regulation for blockchain prediction markets, and there are strict restrictions on gambling activities, which affects market expansion. The difference between prediction markets and gambling is their ability to aggregate information.
GateNews5h ago
Polymarket takes down market on missing US pilot after backlash
Polymarket removed a market tied to the fate of a missing US service member after mounting backlash, saying the listing violated its “integrity standards.”
The controversy erupted after a prediction market appeared asking whether US authorities would confirm the rescue of a pilot reportedly shot
Cointelegraph7h ago
A prediction market platform delisted a “Missing U.S. military aviator” prediction market, saying it violated integrity standards.
A prediction market platform removed markets about the fate of a missing American pilot for violating the “integrity standards,” triggering controversy. U.S. House lawmakers criticized such betting as “disgusting” and questioned rule transparency. Meanwhile, concerns about insider trading have intensified, and regulators are calling for stronger restriction measures.
GateNews8h ago
Shanghai issues the "Game Ten Rules of Shanghai," supporting game esports enterprises in R&D and application in technology fields such as blockchain
Shanghai Municipal Government issued the “Game 10 Articles for Shanghai,” supporting the development of the gaming and esports industries, focusing on the application and R&D of technologies such as AI, big data, and blockchain, promoting cooperation between game companies and device manufacturers, and exploring multi-device development.
GateNews8h ago
The Cyberspace Administration of China is soliciting public comments on the “Administrative Measures for the Information Services of Digital Virtual Humans”
Gate News message, April 4, the Cyberspace Administration of China released a notice on publicly soliciting comments on the draft of the Measures for the Administration of Information Services for Digital Virtual Humans. The Measures state that starting from the provision of digital virtual human services, service providers of digital virtual human services, service users, and service providers that provide online information content dissemination services shall, throughout the entire process, continuously display prominent warning signage containing the wording "digital human" in the digital virtual human display area, and shall comply with the regulations regarding signage for state-made artificial intelligence generated synthetic content. (Xinhua News Agency)
GateNews8h ago
