Paxful Fined $4 Million for Anti-Money Laundering Violations, U.S. Department of Justice Claims It Profited from Criminal Fund Flows

Odaily News The U.S. Department of Justice announced that cryptocurrency trading platform Paxful Holdings Inc. has been ordered to pay a $4 million fine for failing to establish effective anti-money laundering controls. Prosecutors allege that the platform long allowed illegal funds associated with fraud, prostitution, and human trafficking to flow through its system and profited from it.

The Department of Justice stated that Paxful continued to provide services despite knowing that some customers' funds were linked to criminal activities, even marketing its lax anti-money laundering oversight as a selling point to attract users. The investigation also pointed out that the platform had processed cryptocurrency transactions for websites including Backpage, which was believed to be used for posting prostitution-related advertisements, some involving minors.

Data shows that between 2015 and 2022, approximately $17 million worth of Bitcoin was transferred to related websites through Paxful wallets, from which the platform earned at least $2.7 million in profit. The Department of Justice claimed that Paxful's founder even referred to the resulting business growth as the "Backpage effect."