Paxful Slapped with $3.5M Fine by FinCEN for $500M in Alleged Illicit Crypto Flows

Another day, another crypto compliance wake-up call.

The U.S. Financial Crimes Enforcement Network (FinCEN) just dropped the hammer on a major peer-to-peer marketplace. The agency alleges significant failures in anti-money laundering controls, leading to a massive settlement.

The Core of the Crackdown

Regulators claim the platform's systems were porous. They point to a lack of proper transaction monitoring and inadequate customer due diligence as the key failures that allowed bad actors to operate. The message is clear: treat compliance as an afterthought, and prepare to pay up.

A Price Tag for Lapses

The financial penalty is steep, but the reputational cost might be higher. For an industry fighting for mainstream trust, headlines like this are a gift to skeptics—a stark reminder that while crypto promises to disrupt traditional finance, it hasn't quite figured out how to bypass the old rules about knowing your customer.

This enforcement action isn't an isolated event. It's part of a broader regulatory squeeze, signaling that the 'wild west' days are over. Exchanges and platforms are now squarely in the sights of watchdogs worldwide, expected to build walls just as high as any legacy bank.

So, while the tech evolves at light speed, the basics of financial integrity remain non-negotiable. Build for the future, but comply for today—or your innovation fund might just become a legal fee reserve.

FinCEN Says Paxful Ignored Basic Anti–Money Laundering Rules

Regulators said Paxful failed to implement even the most basic requirements of the Bank Secrecy Act (BSA), including registering as a money services business, maintaining an anti-money-laundering program, and filing suspicious activity reports.

“For years, Paxful disregarded its BSA obligations and facilitated transactions associated with illicit activity and high-risk jurisdictions,” FinCEN Director Andrea Gacki said.

Paxful acknowledged that it willfully violated federal law. The consent order highlights major compliance lapses during the years in which Paxful operated without adequate oversight, largely due to failures by former leadership.

FinCEN said the company has since taken steps to correct past misconduct, including firing senior figures responsible for the violations and conducting an internal review to identify suspicious activity previously left unreported.

Regulators from multiple federal agencies assisted in the case, including the Justice Department’s Money Laundering and Narcotics section, the US Attorney’s Office for the Eastern District of California, and Homeland Security Investigations.

Today, FinCEN assessed a $3.5 million penalty against Paxful for facilitating suspicious activity involving illicit actors. https://t.co/dkdJNxPCIL pic.twitter.com/wVBAwlHyvr

The agency emphasized that firms involved in digital assets must adjust their controls to match the risks inherent in dealing with crypto, especially exposure to sanctioned jurisdictions and anonymous transfers.

In 2023, Paxful shut down its peer-to-peer crypto marketplace, citing the broader industry downturn, regulatory pressure, and internal turmoil.

CEO RAY Youssef cited multiple factors behind the shutdown, including major staff departures, increasingly burdensome US regulatory requirements, and a lawsuit filed by a co-founder, reportedly Artur Schaback.

He said compliance demands had grown so intense that even dedicating a quarter of Paxful’s workforce to compliance was not enough.

The company also lacked the resources to continue operating while blocking US users, making a full marketplace suspension unavoidable.

B.C. Seizes Over $1M in Gold, Cash Linked to QuadrigaCX Co-Founder

As reported, British Columbia has secured a major legal victory after obtaining a court order to seize more than $1 million in gold, cash, and luxury goods tied to QuadrigaCX co-founder Michael Patryn.

The forfeiture comes under the province’s unexplained wealth order regime, which requires individuals to prove their assets were acquired lawfully.

Patryn chose not to contest the action, allowing authorities to MOVE forward with liquidating the seized items.

The seized assets were discovered in a Vancouver safety deposit box and included 45 Gold bars, luxury watches, jewelry, and a loaded .45-caliber pistol.

At today’s prices, the gold alone is worth over $800,000. The province’s civil forfeiture office alleges these items were purchased using misappropriated QuadrigaCX customer funds, citing evidence gathered during a broader RCMP investigation.