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
The White House releases a cybersecurity strategy document, incorporating cryptocurrency and blockchain for the first time and emphasizing the fight against anonymous financial channels.
The White House released "President Trump's Cyber Strategy," emphasizing cyber offense, defense, and deterrence, and for the first time mentioning the protection of cryptocurrencies and blockchain. The strategy will target transnational cybercrime, expand cyber operation authorities, mobilize the private sector, and promote AI-driven defense systems.
GateNews28m ago
SEC Chair Aligns With Trump on Need for Digital Asset Regulation Clarity
Momentum builds in Washington for clearer U.S. crypto rules as SEC Chair Paul Atkins backs the Clarity Act, aligning with President Donald Trump’s push to secure regulatory certainty and keep digital asset innovation anchored in America.
SEC Signals Strong Push for Clear Crypto Market Rules
U.S.
Coinpedia46m ago
Florida Gov. Ron DeSantis Eyes State Stablecoin Framework Following Senate Passage
Florida's Senate unanimously passed Senate Bill 314, regulating stablecoins under its anti-money laundering laws and defining them as “monetary value.” Governor DeSantis is expected to sign the bill, aligning state oversight with federal guidelines.
Decrypt3h ago
Russia Considers Separate Stablecoin Law Amid Crypto Regulation Reforms
Key Insights
Russia separate stablecoin law may create clear legal status for fiat-pegged tokens within the national financial system.
Lawmakers may restrict trading on unlicensed crypto platforms under a broader exchange regulation bill.
A ruble-pegged stablecoin approved for trade highlights Ru
CryptoBreaking8h ago
Curve Finance accuses a decentralized trading platform of unauthorized use of its code
Curve Finance recently stated that a certain decentralized trading platform used its code without permission, violating open-source licenses, and emphasized that this action is illegal and unwise. Curve Finance proposed that legitimate use of its Stableswap functionality can be achieved through licensing or collaboration to ensure the safety of user funds.
GateNews9h ago
