SACRAMENTO, Calif. – A $4 million criminal penalty was handed to Paxful Holdings, Inc., a virtual currency trading platform, following its guilty plea to several federal charges. These charges included conspiring to promote illegal prostitution, violating the Bank Secrecy Act, and transmitting funds from criminal activities.
According to the Justice Department, Paxful profited by facilitating transactions for criminals and failing to comply with anti-money laundering laws. “This sentence shows that companies will be held accountable when they create safe havens for criminal activity,” said Assistant Attorney General A. Tysen Duva.
U.S. Attorney Eric Grant emphasized the consequences for Paxful’s actions, stating that the company prioritized profit over compliance. “The U.S. Attorney’s Office will continue to protect victims and ensure that the cryptocurrency ecosystem is not exploited by criminals,” said Grant.
From 2017 to 2019, Paxful facilitated over 26.7 million trades totaling nearly $3 billion, knowing that some funds were linked to illegal activities. The platform was used to transfer proceeds from fraud, prostitution, and other criminal schemes.
Paxful’s collaboration with Backpage, an advertising platform for illicit activities, resulted in $17 million worth of bitcoin being transferred. Paxful’s founders marketed the platform as not requiring know-your-customer information, which allowed users to engage in suspicious activities without oversight.
The case was investigated by the IRS Criminal Investigation and Homeland Security Investigations. The Justice Department’s resolution with Paxful was influenced by the seriousness of the offenses and the company’s cooperation during the investigation.