Defunct P2P Crypto Platform Paxful Sentenced to $4M Penalty for Money Laundering, Travel Act Violations

Prioritizing Profit Over Compliance

Paxful Holdings, a peer-to-peer cryptocurrency trading platform, has been sentenced to pay a $4 million criminal penalty after admitting to conspiring in schemes that promoted illegal prostitution, violated the Bank Secrecy Act, and knowingly transmitted criminal proceeds. The penalty, announced by the Justice Department, reflects Paxful’s limited ability to pay. Prosecutors had initially deemed a $112.5 million fine appropriate based on the scale of the misconduct.

According to Assistant Attorney General A. Tysen Duva, Paxful “profited from moving money for criminals” by advertising its lack of anti-money laundering controls. U.S. Attorney Eric Grant emphasized that the company “enabled money laundering and other crimes” by prioritizing revenue over legal compliance.

IRS Criminal Investigation Special Agent Linda Nguyen added that Paxful’s disregard for rules “enabled the movement of illicit funds at scale.”

The ‘Backpage Effect’

The sentencing of Paxful, which shut down in October 2025, followed its guilty plea earlier that year. The Justice Department determined the platform lacked the financial capacity to pay more than $4 million. The fine addresses Paxful’s facilitation of more than 26.7 million trades worth nearly $3 billion, which generated $29.7 million in revenue.

U.S. authorities argued the platform knowingly processed transactions tied to a site later shuttered for promoting illegal prostitution and sex trafficking. Court documents allege Paxful’s founders even touted the “Backpage Effect” as a growth driver, with nearly $17 million in bitcoin flowing from Paxful wallets to Backpage and similar sites.

Violations and Marketing Tactics

Authorities alleged that from 2015 to 2019, Paxful marketed itself as a platform without know-your-customer (KYC) requirements, presented fake anti-money laundering policies, and failed to file suspicious activity reports despite clear evidence of criminal use.

Paxful ultimately pleaded guilty to conspiring to violate the Travel Act by promoting illegal prostitution and operating an unlicensed money transmitting business by knowingly moving criminal proceeds. The company also admitted to violating the Bank Secrecy Act by failing to maintain an effective anti-money laundering program.

According to a Justice Department statement, Paxful received partial credit for cooperating with investigators and implementing remedial measures, though prosecutors noted the company failed to voluntarily disclose its misconduct.

Paxful co-founder and former CTO Artur Schaback pleaded guilty in July 2024 to related conspiracy charges.

FAQ ❓

• What happened to Paxful Holdings? Paxful was sentenced in the U.S. to pay a $4 million criminal penalty after pleading guilty to money laundering and prostitution‑related conspiracies.
• Why was Paxful fined? Authorities said the platform knowingly processed illicit transactions, including ties to Backpage.com, while ignoring anti‑money laundering laws.
• How big was Paxful’s operation? Between 2017 and 2019, Paxful facilitated over 26.7 million trades worth nearly $3 billion, generating $29.7 million in revenue.
• What does this mean for crypto platforms globally? The case signals that regulators worldwide will hold exchanges accountable if they prioritize profit over compliance.