Leaders of the disgraced exchange have either already been sentenced or face sentencing
Peer-to-peer crypto marketplace Paxful has been ordered to pay a $4 million penalty after admitting it benefited from criminal activity on its platform. The US Justice Department said the company pleaded guilty in December to charges tied to promoting illegal prostitution, transmitting funds linked to crimes, and failing to meet anti-money laundering standards.
Virtual Asset Trading Platform Sentenced for Violating the Travel Act and Other Federal Criminal Charges https://t.co/Orm3CQMqgP
— Criminal Division (@DOJCrimDiv) February 11, 2026
Federal prosecutors said Paxful drew in bad actors by promoting minimal compliance checks. Officials argued the company knew that some users were involved in fraud, extortion, prostitution, and sex trafficking, yet continued processing their transactions. Authorities said the platform’s weak controls allowed illicit funds to move freely.
Between January 2017 and September 2019, Paxful handled more than 26 million trades worth close to $3 billion. During that period, the company generated nearly $30 million in revenue. Although the agreed criminal penalty was set at $112.5 million, prosecutors determined Paxful could only afford to pay $4 million.
Investigators said Paxful advertised itself as a service that did not require extensive customer verification. The company also presented anti-money laundering policies that prosecutors claim were not properly enforced. One major client was Backpage, a classified advertising site later shut down for hosting illegal prostitution ads.
According to the Justice Department, Paxful earned about $2.7 million through its relationship with Backpage and a similar platform over several years. Company founders allegedly referred to the growth tied to Backpage as the “Backpage Effect.”
Paxful ceased operations in November, citing past misconduct by former co-founders and rising compliance costs. Former CTO Artur Schaback has pleaded guilty to anti-money laundering violations and is awaiting sentencing. Authorities have not announced charges against co-founder Ray Youssef.
