Paxful Faces $4 Million Fine Over Crypto Crime Connections

The U. S. Justice Department ordered Paxful, a peer‑to‑peer crypto exchange, to pay $4 million after the company admitted it knowingly helped criminals move money. In December, Paxful pleaded guilty to conspiring in illegal prostitution, sending funds from crime and breaking anti‑money laundering rules. Prosecutors said the platform attracted bad actors by claiming it had no customer checks and faked anti‑laundering policies. From 2017 to 2019, Paxful handled over 26 million trades worth nearly $3 billion and earned more than $29. 7 million in revenue. The government had wanted a $112. 5 million penalty, but found Paxful could only afford $4 million. Paxful’s marketing bragged about the “Backpage Effect. ”Backpage, a shut‑down site that hosted illegal prostitution ads, was one of Paxful’s clients. Between 2015 and 2022, the crypto platform made $2. 7 million in profit from this partnership. The company shut down its operations in November, citing past misconduct by former co‑founders and high compliance costs. A former chief technology officer pleaded guilty in July 2024 to failing to maintain an effective anti‑laundering program and is awaiting sentencing. The case shows how crypto platforms can be used for crime when they skip proper checks. It also highlights the difficulty of holding companies financially accountable when their profits are tied to illicit activity.