Paxful Fined $4 Million for AML Violations and Illegal Fund Processing

Paxful, a peer-to-peer cryptocurrency exchange, has been sentenced to pay $4 million after pleading guilty to federal charges including conspiracy to promote illegal prostitution, transmission of criminal proceeds, and failure to comply with anti-money laundering (AML) regulations. The penalty represents a significant reduction from the $112.5 million initially sought by prosecutors.

Between 2017 and 2019, the platform processed approximately $3 billion across 26 million trades while knowingly servicing criminal enterprises. Court documents reveal Paxful actively courted illicit actors, including operators of the shuttered Backpage.com, earning $2.7 million in profits from unlawful activities before ceasing operations in November 2023.

The Department of Justice highlighted Paxful's deliberate misrepresentation of its compliance posture. While marketing itself as a non-KYC platform, the exchange falsely advertised AML policies it never enforced—a calculated strategy that ultimately proved costly.