Paxful fined $4M for money laundering and sex work links

Paxful was fined $4 million for facilitating illegal prostitution, money laundering, and compliance failures. The penalty was reduced from $112 million due to Paxful’s finances. Authorities cited major AML and KYC lapses.

Paxful Holdings, a peer-to-peer Bitcoin exchange that shut down in 2023, has been ordered to pay a $4 million penalty after pleading guilty to facilitating illegal prostitution, money laundering, and handling criminal proceeds. U.S. authorities determined that Paxful failed to enforce anti-money laundering (AML) and know-your-customer (KYC) regulations, ignored signs of illicit activity, and submitted false compliance policies to regulators. Investigations showed that from 2017 to 2019, Paxful processed over $3 billion in crypto trades, including transactions linked to Backpage, a site associated with illicit sex work. Nearly $17 million in Bitcoin transfers were connected to these activities. The Department of Justice initially sought a penalty exceeding $112 million but reduced it after considering Paxful’s financial situation. Paxful also agreed to a $3.5 million civil penalty for Bank Secrecy Act violations. Authorities stressed that this case highlights increased scrutiny of crypto platforms failing to comply with financial crime regulations.