The Bitcoin platform Paxful has admitted guilt to a three-count criminal information, stating in court that it facilitated the movement of funds for criminals engaged in illegal activities, including prostitution, fraud, and evasion of sanctions.
A “criminal information” refers to a formal document that charges a defendant after waiving indictment and agreeing to plead guilty. Paxful confessed to breaching the Travel Act by promoting illicit prostitution through interstate commerce, running an unlicensed money transfer business, and neglecting to implement a mandated anti-money laundering (AML) program as per the Bank Secrecy Act, as announced in a press release by the Eastern District of California branch of the Department of Justice.
The DOJ revealed that Paxful profited millions by ignoring the illegal activities occurring on its platform. Between 2015 and 2019, Paxful managed almost $3 billion in trades and gained over $29 million in fees. The company was also linked to Backpage, a classified site infamous for illegal sex work. Investigations indicated that nearly $17 million worth of bitcoin traded from Paxful to Backpage, with Paxful earning at least $2.7 million from these transactions.
Prosecutors claimed that rather than preventing misuse, Paxful actively promoted its absence of identity verification and compliance measures to draw users seeking to avoid detection. The company failed to report suspicious activities, falsified its compliance guidelines, and enabled transfers from high-risk areas, including Iran and North Korea.
Initially, the DOJ proposed a $112.5 million penalty for Paxful’s criminal actions, which was later reduced to $4 million after evaluating the company’s current financial status, according to the DOJ.
“The defendant attracted its criminal clientele by advertising its lack of anti-money laundering measures and its explicit choice not to identify its customers,” remarked Acting Assistant Attorney General Matthew R. Galeotti in a statement.
Paxful is scheduled for sentencing in February 2026. Its former chief technology officer, Artur Schaback, also pled guilty last year to related AML offenses. This case stemmed from a collaborative investigation involving the DOJ, the IRS’ Criminal Investigation division, Homeland Security Investigations, and FinCEN.
