Artur Schaback helped bring about the demise of the exchange and has admitted to his role
Artur Schaback, co-founder and former chief technology officer of Paxful, could face up to five years in prison after admitting guilt on Monday to conspiring to neglect the implementation of an effective Anti-Money Laundering (AML) program at the cryptocurrency exchange.
On July 8, the US Justice Department announced that Schaback is set to be sentenced on November 4. Additionally, he will step down from his role on Paxful’s board. According to a plea agreement submitted the same day in a California District Court, government prosecutors have proposed a $5 million fine. Schaback is expected to pay this in three installments: $1 million at the time of his guilty plea, $3 million by his sentencing, and the final $1 million within two years.
A document from late March outlining Schaback’s charges revealed that he and an unnamed co-conspirator—referred to only as Paxful’s “President and Chief Executive Officer”—did not set up an effective AML program within 90 days of the company’s inception, as mandated by the Bank Secrecy Act. Furthermore, Schaback failed to create a Know Your Customer (KYC) program, which is essential for verifying user identities by collecting basic information such as name, birth date, and address.
The Justice Department stated that due to Schaback’s failure to implement AML and KYC programs, Paxful became a conduit for money laundering, sanctions violations and various other criminal activities, including fraud, romance scams, extortion, and prostitution. The filing indicates that between July 2015 and June 2019, Schaback and his co-conspirator permitted users to create Paxful accounts and engage in trades without providing adequate identifying information or documents for verification.
Paxful marketed itself to customers as a platform that did not require KYC and allowed purchasing without ID, according to the filing. When third parties requested an AML policy, Schaback and his co-conspirator presented a policy that had been plagiarized from another institution, which they knew was neither implemented nor enforced.
Emma Rodriguez is the Proofreader at the Big Blind, with seven years of experience and five years in online gambling. She plays a crucial role in maintaining content quality by ensuring error-free, reader-friendly information about the gambling industry.
