- Paxful will pay $7.5 million for illegal cryptocurrency transactions and compliance failures.
- The platform processed $3 billion in trades while enabling fraud prostitution and money laundering.
- Sentencing is set for February 10, 2026 after Paxful pleaded guilty to multiple federal charges.
Paxful Holdings, a decentralized cryptocurrency exchange, has accepted a guilty plea in the federal court. The company will pay the U.S. Department of Justice $4 million in criminal fines. Also, the Financial Crimes Enforcement Network (FinCEN) fined the company $3.5 million in civil penalty. This makes the total penalties to be $7.5 million.
It was online between 2017 and 2019 and made approximately $3 billion trades. It earned more than $29 million of revenue and allowed illegal operation. Federal leaders claimed Paxful willingly handled transactions made by fraudsters, extortionists, money launderers, and prostitution operators.
Involvement in Illegal Transactions
Paxful also enabled people to swap Bitcoin with cash, gift cards, and prepaid cards. The site transacted on the behalf of Backpage, a now-seized online prostitution marketplace. Over the years 2015-2022, Paxful received close to $17 million Bitcoin through Backpage and other similar sites. The company made at least $2.7 million in these transactions.
The Department of Justice stressed that Paxful boasted about the so-called Backpage Effect as one of the main promoters of business expansion. Experts also observed that the platform helped with transactions involving countries that were under sanctions (such as Iran, North Korea, and Venezuela). In this time, more than half a billion in suspicious activity flowed through Paxful.
Failures in Compliance
Federal investigators said Paxful failed to submit required suspicious activity reports. The company also falsely presented its anti-money laundering policies to third parties. Paxful pleaded guilty to three conspiracy counts including promoting illegal prostitution, running an unlicensed money transmitting business and a violation of the Bank Secrecy Act. Earlier this year, BitMEX was also fined $100M by a US court for failing AML rules and KYC requirements over five years.
According to sentencing guidelines, the authorities estimated the appropriate penalty was $112.5 million. Nonetheless, the Justice Department concluded that Paxful could pay virtually a maximum of $4 million. The rest of the $3.5 million civil fine was imposed by FinCEN. Paxful was credited with having cooperated with investigators and implemented recovery actions such as a change of leadership involved in the violations.
Ongoing Legal Process
Paxful will be sentenced on February 10, 2026. Former CTO and co-founder Artur Schaback had earlier in July 2024 pleaded guilty to the same scheme. The concerted efforts of the DOJ and FinCEN are a sign of concerted enforcement. The fines underscore the federal government’s emphasis on cryptocurrencies exchanges that facilitate crime.
Paxful’s case underscores risks in peer-to-peer cryptocurrency trading. Authorities continue monitoring platforms that facilitate illegal transactions while failing compliance checks.
