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. Senators Seek Compromise on Stablecoin Yields, Advance the CLARITY Act
U.S. senators are working to pass a bipartisan compromise on stablecoin yield issues to advance the stalled Cryptocurrency Market Structure Act CLARITY. The banking industry has expressed concerns, believing it could impact deposits. Both sides may need to compromise, exploring a balance between innovation and preventing deposit outflows.
GateNews9m ago
U.S. Democratic lawmakers will introduce legislation explicitly prohibiting the trading of contracts related to war and death events
Gate News: On March 11, U.S. Democratic lawmakers will introduce a bill explicitly banning trading contracts related to war and death events.
GateNews42m ago
Ghana Securities Regulator Designates 11 Companies to Participate in Virtual Asset Trading Pilot
Ghana Securities and Exchange Commission designates 11 companies to participate in the virtual asset trading pilot, which lasts for 12 months. Participants include 5 exchanges, 3 asset tokenization companies, 1 tokenized gold company, 1 payment system company, and 1 custodian. Those who meet the requirements can obtain an official license.
GateNews43m ago
ABA Survey: About Two-Thirds of Consumers Support Limiting Stablecoin Yields to Reduce Financial Risks
A survey by the American Bankers Association shows that most consumers support restricting stablecoin yields to prevent potential risks to the banking system. About two-thirds of respondents believe that stablecoin yields could weaken banks' ability to use funds for community lending, calling on Congress to adopt cautious legislative measures. This issue has become a focal point of debate between the banking industry and the crypto sector in current cryptocurrency legislation discussions.
GateNews1h ago
U.S. court denies Kalshi's temporary restraining order request, stating Congress does not intend to exclude the applicability of state gambling laws
The Ohio State Court in the United States ruled that Congress did not intend to prioritize federal law over state sports betting regulations and dismissed the temporary restraining order application from prediction market platform Kalshi. This case will impact the legality of prediction markets and future regulation.
GateNews1h ago
The U.S. Congress is close to passing legislation to permanently ban the Federal Reserve from issuing CBDCs
Investment bank TD Cowen指出，美国 Congress is close to passing legislation to permanently ban the Federal Reserve from issuing Central Bank Digital Currencies (CBDC). The amendment, proposed by Senator Ted Cruz, aims to turn the current temporary ban into a permanent one, with opponents emphasizing the privacy threats posed by CBDCs. This move could benefit stablecoin issuers but also introduces complex factors for cryptocurrency market legislation.
GateNews1h ago
