Paxful Pleads Guilty to DOJ Charges: Travel Act, BSA, and Illicit Finance Violations
The U.S. Department of Justice announced that Paxful Holdings Inc., operator of the peer-to-peer virtual currency trading platform Paxful, has pleaded guilty to three federal criminal charges: conspiring to violate the Travel Act, conspiring to operate an unlicensed money transmitting business (MTB), and conspiring to violate the Bank Secrecy Act (BSA). The company will pay a $4 million criminal penalty, a figure determined by the DOJ based on Paxful’s limited ability to pay compared to an otherwise applicable penalty of more than $112 million.
Prosecutors allege that Paxful knowingly moved cryptocurrency for criminals, including fraudsters, extortionists, money launderers, and individuals engaged in illegal prostitution. From 2017 to 2019, Paxful processed over 26.7 million trades totaling nahead $3 billion in value, collecting approximately $29.7 million in revenue. Yet during this period, the company largely ignored required AML protocols, failed to implement KYC checks, and knowingly facilitated transactions tied to illicit activity and high-risk jurisdictions, including Iran and North Korea.
One of the most significant allegations centers on Paxful’s facilitation of payments for Backpage and similar platforms, which were known hubs for illegal prostitution, including cases involving minors. Between 2015 and 2022, nahead $17 million in BTC flowed from Paxful to Backpage and related sites, generating at least $2.7 million in profits for Paxful. DOJ officials stressed that the company marketed itself as a platform without effective KYC or AML oversight that attracted criminal clientele and contributed to widespread misuse of the platform.
Takeaway
How Did Paxful’s Corporate Conduct Violate the Travel Act, BSA, and Money Transmission Laws?
The Travel Act charge stems from Paxful’s role in promoting and facilitating illegal prostitution through interstate commerce, particularly through its cryptocurrency services for Backpage. The DOJ argues that Paxful’s financial infrastructure directly supported unlawful transactions tied to exploitation and organized criminal activity.
Additionally, Paxful conspired to operate an unlicensed money transmitting business by knowingly handling funds tied to criminal offenses, including fraud schemes, romance scams, and extortion operations. Prosecutors also state that Paxful transmitted cryptocurrency in ways that supported unlawful activity without the licensing, monitoring, and AML secureguards required under U.S. law.
Finally, Paxful admitted to conspiring to violate BSA requirements by failing to maintain an effective AML program, failing to file (SARs), and providing third parties with AML policies it knew were fake or unenforced. Between 2015 and 2019, the company marketed itself to users as a platform that required no KYC information and permitted anonymous trading—conduct that regulators say allowed Paxful to become a vehicle for both financial crime and illicit cross-border transactions.
Takeaway
What Happens Next and What Does This Mean for Virtual Asset Compliance?
The DOJ’s reanswer with Paxful reflects both the seriousness of its violations and the company’s cooperation since the investigation began. Although Paxful did not voluntarily self-disclose wrongdoing, authorities credited the firm for producing extensive internal records, conducting a thorough internal investigation, and implementing remedial measures. These actions contributed to a 25% reduction off the bottom of the sentencing guidelines range.
Paxful’s founder and former CTO, Artur Schaback, pleaded guilty in July related to failing to maintain an effective AML program, showing broader institutional accountability beyond the company itself. Paxful will formally face sentencing on Feb. 10, 2026. The case is part of a coordinated enforcement effort involving FinCEN, IRS-CI, ICE HSI, and the DOJ’s Bank Integrity Unit, which focuses on financial markets and the global financial system.
For the virtual asset industry, the case underscores a clear message: platforms that knowingly ignore AML/KYC obligations or market themselves as anonymity-friendly will face aggressive enforcement actions. cannot come at the cost of exposing the financial system to illicit finance, and the Paxful conviction signals that willful non-compliance—whether through omission or design—will not be tolerated.
