Paxful, a peer-to-peer cryptocurrency trading platform, has been ordered to pay a $4 million penalty after admitting guilt to several federal offenses, as stated in an official press release from the U.S. Department of Justice.

The reduced penalty comes after Paxful acknowledged its involvement in promoting illegal prostitution and violating the Bank Secrecy Act, alongside knowingly facilitating the transmission of funds linked to criminal activity.

Illicit Crypto Activities

The fine was calculated based on the firm’s capacity to pay. Authorities assert that Paxful profited by enabling criminals to conduct transactions while neglecting crucial anti-money laundering (AML) measures. The company was aware that its platform was used for various criminal enterprises, such as fraud and human trafficking.

Legal documents indicate that between January 1, 2017, and September 2, 2019, Paxful processed over 26.7 million trades, amounting to nearly $3 billion. Paxful’s actions directly facilitated transactions for Backpage, a website that has since faced scrutiny for promoting illegal activities, including prostitution involving minors.

According to the Justice Department, between December 2015 and December 2022, Paxful transferred nearly $17 million in Bitcoin to Backpage and similar sites, thus securing at least $2.7 million in profits from these dealings.

DOJ Reduces Penalty

Paxful’s plea included admitting to conspiring to thwart the Travel Act, supporting illegal prostitution through interstate commerce, and operating an unlicensed money transmitting service. Although initially assessed at $112.5 million, the Department of Justice concluded that Paxful could only afford $4 million as a resolution.

Artur Schaback, Paxful’s co-founder and former CTO, also pleaded guilty to related violations in July 2024.