Paxful has been ordered to pay a $4 million criminal fine after pleading guilty to multiple federal offenses, the U.S. Department of Justice confirmed. The platform admitted it conspired to promote illegal prostitution, violated the Bank Secrecy Act, and knowingly moved funds linked to criminal activity.
Authorities said the penalty was based on the company’s ability to pay. Paxful profited from facilitating transactions for criminals while failing to enforce anti-money laundering controls, even though it knew some users were involved in fraud, extortion, prostitution, commercial sex trafficking, romance scams, and human trafficking.
Court documents show that from January 2017 to September 2019, Paxful processed over 26.7 million trades worth nearly $3 billion and earned more than $29.7 million in revenue. Part of these transactions involved illicit funds, including transfers on behalf of Backpage, a platform later convicted of promoting illegal prostitution, including content involving minors.
The Justice Department reported that Paxful’s founders internally called this the “Backpage Effect,” which they credited for platform growth. Between 2015 and 2022, almost $17 million in Bitcoin was transferred from Paxful wallets to Backpage and similar websites, generating at least $2.7 million in profit for the company.
From 2015 to 2019, Paxful marketed itself as a platform that did not require know-your-customer verification. It allowed trades without proper KYC data, provided unenforced AML policies to third parties, and failed to report suspicious activity despite clear indicators of criminal conduct.
Paxful pleaded guilty to conspiring to violate the Travel Act by promoting illegal prostitution across state lines, operating an unlicensed money transmitting business, and violating AML requirements under the Bank Secrecy Act. The department reduced the fine from the initially agreed $112.5 million to $4 million due to the company’s limited ability to pay.
The resolution was coordinated with the Financial Crimes Enforcement Network, and in July 2024, co-founder and former CTO Artur Schaback also pleaded guilty to related anti-money laundering violations.
