Trading platform Paxful admits to criminal offenses and will pay a $7.5 million fine.

According to Odaily, Paxful Holdings Inc., a peer-to-peer Bitcoin exchange that shut down in 2023, has agreed to plead guilty to three federal criminal charges and pay a $4 million criminal fine to the U.S. Department of Justice. Additionally, FinCEN issued a $3.5 million civil penalty on the same day, bringing the total amount of penalties to $7.5 million.

The Department of Justice pointed out that Paxful facilitated approximately $3 billion in transactions and earned over $29 million in revenue between 2017 and 2019, yet it knowingly used its platform for fraud, extortion, money laundering, and illegal sex trafficking, and used the "lack of anti-money laundering controls" as a selling point to attract illegal users.

Investigations revealed that Paxful provided transaction services to Backpage, an illegal sex trafficking platform that was shut down in 2018. Between 2015 and 2022, approximately $17 million worth of Bitcoin flowed from Paxful to Backpage and similar websites, generating at least $2.7 million in profit for Paxful. Its founding team even internally celebrated the so-called "Backpage effect."

In addition, Paxful processed suspicious transactions involving sanctioned countries such as Iran, North Korea, and Venezuela, totaling more than $500 million, and failed to submit suspicious activity reports as required for a long period of time, and misled the outside world about its anti-money laundering measures.

The Department of Justice stated that, based on sentencing guidelines, Paxful would have been fined $112.5 million, but considering its actual ability to pay and its subsequent cooperation with the investigation, the final criminal penalty was determined to be $4 million. The company will face final sentencing on February 10, 2026.

It's worth noting that Paxful co-founder and former CTO Artur Schaback pleaded guilty to the charges in July 2024. (Decrypt)