Crypto exchange Paxful is set to be sentenced on February 10, 2026, after reaching a plea agreement with U.S. authorities that brings a long-running federal investigation to a close.
The peer-to-peer Bitcoin platform, which ceased operations in 2023, has agreed to plead guilty to multiple federal charges, pay a combined $7.5 million in penalties, and return remaining customer funds.
The agreement, reached with the U.S. Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN), centers on Paxful’s failure to comply with anti-money laundering (AML) and Bank Secrecy Act (BSA) requirements while knowingly facilitating large volumes of illicit transactions.
According to federal prosecutors, Paxful Holdings Inc. operated an unlicensed money-transmitting business and deliberately failed to implement effective AML controls while processing billions of dollars in cryptocurrency trades.
Criminal and Civil Penalties Total $7.5 Million
Under the plea deal, Paxful will pay a $4 million criminal penalty to the DOJ. This is in addition to a $3.5 million civil fine imposed by FinCEN for willful violations of the Bank Secrecy Act. While sentencing guidelines initially calculated a potential penalty of $112.5 million, prosecutors acknowledged that Paxful could reasonably pay only a fraction of that amount.
The DOJ said the reduced penalty reflects Paxful’s financial condition and its cooperation with investigators after problematic leadership was removed.
Despite this, the government emphasized that the misconduct was extensive and long-standing.
“Paxful made millions of dollars in part by knowingly moving cryptocurrency for the benefit of fraudsters, extortionists, money launderers, and purveyors of prostitution,” said Acting Assistant Attorney General Matthew R. Galeotti of the Justice Department’s Criminal Division.
“The defendant attracted its criminal clientele by promoting its lack of anti-money laundering controls and its deliberate decision not to identify its customers.”
Billions in Trades, Millions in Illicit Activity
Federal authorities said Paxful facilitated roughly $3 billion in transactions between 2017 and 2019, earning more than $29 million in revenue during that period. Much of this activity occurred on Paxful’s peer-to-peer marketplace, where users exchanged Bitcoin and other cryptocurrencies for fiat currency, prepaid cards, and gift cards.
Investigators found that the platform was widely used by criminal actors, including fraudsters and money launderers, and that Paxful failed to file required suspicious activity reports despite clear warning signs.
One of the most serious findings involved Paxful’s role in processing payments for Backpage, an illegal online prostitution advertising platform seized by the U.S. government in 2018. Between 2015 and 2022, nearly $17 million worth of Bitcoin flowed from Paxful to Backpage and similar sites, generating at least $2.7 million in profits for the exchange.
Prosecutors said company insiders were aware of the impact.
Internal communications reportedly referenced a “Backpage Effect,” which executives celebrated for driving user growth and transaction volume.
Sanctioned Countries and Compliance Failures
The DOJ also said Paxful facilitated transactions involving sanctioned jurisdictions, including Iran, North Korea, and Venezuela. More than $500 million in suspicious activity tied to sanctioned entities and high-risk regions passed through the platform, according to court filings.
Despite being aware of these risks, Paxful misrepresented its AML policies to third parties and failed to implement basic compliance measures required under U.S. law.
As part of the plea agreement, Paxful admitted guilt to three conspiracy charges: promoting illegal prostitution in violation of the Travel Act, operating an unlicensed money-transmitting business, and violating the Bank Secrecy Act.
Cooperation and Leadership Accountability
Authorities noted that Paxful received partial credit for cooperating with investigators and taking remedial steps after the violations came to light. This included terminating leadership figures deemed responsible for the compliance failures.
One of those leaders, Paxful co-founder and former chief technology officer Artur Schaback, pleaded guilty in July 2024 to charges stemming from the same scheme.
Paxful has also committed to refunding remaining customer funds as part of its wind-down process, marking the final chapter for a platform that once ranked among the most prominent peer-to-peer Bitcoin exchanges globally.
Sentencing for Paxful Holdings Inc. is scheduled for February 10, 2026, bringing closure to a case that underscores the growing enforcement pressure on crypto platforms that fail to meet U.S. compliance standards.
