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
U.S. SEC Chair: Collaboration with CFTC will include joint meetings and joint inspections
SEC Chairman Paul Atkins stated that the SEC and CFTC are drafting a memorandum of understanding to strengthen cooperation, enhance regulatory coordination, and prevent companies from being subjected to dual regulation. The two agencies will handle product applications through joint meetings and a new website, and promote the development of "super apps" to enable users to conveniently complete cross-agency transactions.
GateNews7m ago
Trump's tax cuts bring a $3,700 refund, but cryptocurrency taxes remain unchanged
The Trump administration's "Middle-Class Tax Relief" policy showed results in the 2026 tax season, processing over 63.5 million tax returns with an average refund of over $3,700, but it did not cover cryptocurrency taxation rules. Cryptocurrency investors still need to report capital gains taxes according to current tax laws. The newly launched "Trump Account" program also offers government funding, but the complex tax reporting situation for cryptocurrencies remains.
MarketWhisper19m ago
U.S. lawmakers propose: Remove the sunset clause in 2030 and advocate for a permanent ban on issuing CBDCs
Cruz proposal to remove the sunset clause on the CBDC ban, aiming to permanently prohibit the Federal Reserve from issuing digital dollars, intensifies the congressional debate over digital currency.
Senator introduces amendment advocating for a permanent ban on the United States issuing CBDC
-----------------------
The U.S. Congress's debate over Central Bank Digital Currency (CBDC) policies has heated up again. According to reports
CryptoCity26m ago
U.S. Senators Seek Compromise on Stablecoin Yields, Advance the CLARITY Act
U.S. senators are working to pass a bipartisan compromise on stablecoin yield issues to advance the stalled Cryptocurrency Market Structure Act CLARITY. The banking industry has expressed concerns, believing it could impact deposits. Both sides may need to compromise, exploring a balance between innovation and preventing deposit outflows.
GateNews57m ago
U.S. Democratic lawmakers will introduce legislation explicitly prohibiting the trading of contracts related to war and death events
Gate News: On March 11, U.S. Democratic lawmakers will introduce a bill explicitly banning trading contracts related to war and death events.
GateNews1h ago
Ghana Securities Regulator Designates 11 Companies to Participate in Virtual Asset Trading Pilot
Ghana Securities and Exchange Commission designates 11 companies to participate in the virtual asset trading pilot, which lasts for 12 months. Participants include 5 exchanges, 3 asset tokenization companies, 1 tokenized gold company, 1 payment system company, and 1 custodian. Those who meet the requirements can obtain an official license.
GateNews1h ago
