CMC News

Paxful Sentenced $4 Million Fine for Enabling Criminal Transactions and Money Laundering

A federal court sentenced #Paxful Holdings to pay $4 million in criminal penalties on Tuesday after the peer-to-peer Bitcoin exchange pleaded guilty to facilitating money laundering and illegal activity. The Department of Justice originally contemplated fines exceeding $112 million but reduced the amount based on the company's inability to pay.

Paxful admitted to knowingly transferring funds connected to #fraud, prostitution, and commercial sex trafficking schemes. The platform processed approximately $3 billion in trades between 2017 and 2019, generating nearly $30 million in revenue during that period, according to prosecutors.

The exchange facilitated transactions for Backpage, a website advertising prostitution services that profited from illegal sex work involving minors. Paxful's founders referred to growth driven by such activity as the "Backpage Effect" in internal communications, the Justice Department stated.

Between 2015 and 2022, Paxful transferred roughly $17 million in $BTC from company wallets to Backpage and similar platforms. The company earned at least $2.7 million in profits from these transactions while deliberately maintaining inadequate Anti-Money Laundering controls.

U.S. Attorney Eric Grant stated the sentence sends a clear message that companies ignoring #criminal activity on their platforms will face serious legal consequences. Paxful attracted customers by promoting its lack of compliance systems and failure to follow money #laundering laws, according to prosecutors.

The platform allowed customers to negotiate #digital asset trades for cash, prepaid cards, and gift cards. Founders marketed the service as a method to circumvent Bank Secrecy Act Anti-Money Laundering requirements, deliberately building systems that enabled illicit fund transfers.