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
Trump publicly pressures to advance the "Clarity Act," Ripple CEO Brad Garlinghouse supports crypto regulation reform
On March 6th, Ripple CEO Brad Garlinghouse supported Trump's tough stance on the "Clarity Act," calling on the U.S. Congress to push for the bill to clarify the regulatory framework for digital assets. Currently, due to disputes over stablecoin yield models, the bill is stalled in the Senate, affecting market sentiment.
GateNews6m ago
Bitcoin becomes a new challenge in divorce asset division: Russian lawyers say the anonymity of crypto assets makes court proceedings more complicated
As cryptocurrencies become more popular in Russia, asset division involving digital assets like Bitcoin in divorce proceedings has become more complicated. Legal experts point out that the anonymity and private key features make it difficult for courts to verify assets, calculate their value, and enforce division. Although cryptocurrencies are considered marital property, there are many challenges in actual enforcement, and relevant laws are still under discussion.
GateNews12m ago
Fed, FDIC, and OCC Clarify Capital Rules for Tokenized Securities
U.S. regulators confirm that tokenized securities will be treated the same as traditional securities under capital rules, emphasizing a technology-neutral approach that focuses on the security's nature and risk rather than the issuance method.
TodayqNews15m ago
U.S. "Digital Asset Market Regulation Act" negotiations restart, with Tom Tillis leading the development of stablecoin and DeFi regulatory framework
The United States is resuming negotiations around the Digital Asset Market Regulation Act, with Senator Tom Tillis pushing the bill forward to clarify the jurisdiction and compliance standards for digital asset regulation. Although there are disputes over the stablecoin yield mechanisms, all parties are working to find a balance. A review and vote are expected to take place in late March, and if approved, a comprehensive cryptocurrency regulatory framework will be established.
GateNews23m ago
SEC issues clarification guidelines! Promoting a token classification framework, what significant impact does classification have on the industry?
The U.S. Securities and Exchange Commission (SEC) has submitted interpretive guidance to the White House to clarify the legal scope of different types of crypto assets and establish a "Token Classification Framework," aiming to clearly define which assets are considered securities. This move, in the context of the stalled progress of the Market Structure Bill, accelerates the regulatory framework for digital assets and could profoundly influence global crypto market regulation trends.
CryptoCity1h ago
Fed, FDIC, and OCC Issue Crucial Clarification on Blockchain-Based Securities - U.Today
The U.S. banking regulators clarified that tokenized securities will have the same capital requirements as traditional assets, promoting a technology-neutral approach. This guidance encourages traditional banks to adopt blockchain without imposing additional capital buffers, while still emphasizing necessary risk management.
UToday1h ago
