On 11 February 2026, the US DOJ announced that Paxful Holdings Inc., an online peer to peer virtual currency trading platform, was sentenced to pay a criminal penalty of USD 4 million. The sentence followed Paxful’s guilty plea to conspiracies to promote illegal prostitution, violate the United States Bank Secrecy Act (BSA) and knowingly transmit funds derived from criminal offences.
Paxful pleaded guilty in December 2025 in the United States District Court for the Eastern District of California. Court documents established that the appropriate criminal penalty was USD 112,500,000. The US DOJ determined that Paxful lacked the ability to pay more than USD 4 million. Paxful received a 25 per cent reduction from the bottom of the applicable sentencing guidelines fine range. This credit reflected cooperation with the investigation and remedial measures undertaken.
From 1 January 2017 to 2 September 2019, Paxful facilitated more than 26.7 million trades. These totalled nearly USD 3 billion in value. The platform collected more than USD 29.7 million in revenue during this period.
Paxful knowingly transferred virtual currency on behalf of customers, including Backpage, an online advertising platform for illicit prostitution. Between December 2015 and December 2022, the collaboration with Backpage and a similar site caused nearly USD 17 million in Bitcoin to be transferred from the Paxful wallet to these platforms. Paxful earned at least USD 2.7 million in profits from this arrangement. Paxful’s founders described this revenue stream as the “Backpage Effect.”
From July 2015 to June 2019, Paxful marketed itself as a platform that did not require KYC information. It allowed customers to open accounts and trade without sufficient identification. The company presented fabricated AML policies to third parties. It failed to file a single suspicious activity report (SAR) until November 2019, despite awareness of criminal activity on its platform.
“Paxful profited from moving money for criminals that it attracted by touting its lack of anti-money laundering controls and failure to comply with applicable money-laundering laws, all while knowing that these criminals were engaged in fraud, extortion, prostitution and commercial sex trafficking,” said US DOJ Assistant Attorney General A. Tysen Duva.
On 8 July 2024, Paxful co founder and former Chief Technology Officer Artur Schaback pleaded guilty to conspiracy to fail to maintain an effective AML programme. The guilty plea was part of a coordinated resolution with the Financial Crimes Enforcement Network (FinCEN), which assessed a USD 3.5 million civil money penalty.
Homeland Security Investigations (HSI) and IRS CI investigated the case.
Compliance Considerations for Peer to Peer Virtual Currency Platforms
The Paxful conviction is among the most consequential enforcement actions against a peer to peer cryptocurrency exchange. It establishes that platforms which market non compliance as a feature face criminal liability. The absence of KYC procedures, SAR filing obligations and independent AML auditing collectively constituted the basis for conviction. VASPs operating in any jurisdiction must ensure BSA compliance, FinCEN registration and robust transaction monitoring. The case further illustrates that profit derived from facilitating criminal transactions, even through third party integrations, attracts direct criminal liability for the platform entity itself.
