Peer-to-peer virtual currency platform Paxful Holdings Inc. has agreed to plead guilty to federal charges in the Eastern District of California and pay a $4 million criminal penalty. This follows U.S. Department of Justice allegations that the company knowingly enabled money laundering, fraud schemes, and illegal prostitution through its platform.
According to court filings, Paxful admitted to failing to implement anti-money laundering (AML) controls, deliberately avoiding customer identification requirements, and allowing its services to be used by criminals domestically and abroad.
The DOJ stated that Paxful processed millions in illicit transactions by marketing itself as a platform with minimal oversight.
“Paxful made millions of dollars in part by knowingly moving cryptocurrency for the benefit of fraudsters, extortionists, money launderers, and purveyors of prostitution,” said Acting Assistant Attorney General Matthew R. Galeotti. He added that the case demonstrates the DOJ’s commitment to holding crypto platforms accountable.
U.S. Attorney Eric Grant commented that Paxful’s “calculated lack of controls” made it a vehicle for money laundering, sanctions violations, fraud, romance scams, extortion schemes, and prostitution.
Platform Activity and Revenue
The platform facilitated over 26.7 million trades worth nearly $3 billion between 2017 and 2019, earning approximately $29.7 million in revenue during that period.
Facilitation of Illicit Transactions
The company's misconduct also included knowingly transferring bitcoin for Backpage, the infamous illicit prostitution site that later admitted to profiting from ads involving minors.
Between 2015 and 2022, Paxful helped send nearly $17 million in bitcoin to Backpage and a copycat site, earning at least $2.7 million in profits. Founders internally referred to this surge in activity as the “Backpage Effect.”
Legal Violations and Plea Agreement
The plea agreement details years of false AML policies, nonexistent know-your-customer procedures, and a failure to file suspicious activity reports. Paxful ultimately pleaded guilty to three federal conspiracies: violating the Travel Act, operating an unlicensed money-transmitting business, and conspiring to violate the Bank Secrecy Act.
While guidelines suggested a penalty exceeding $112 million, prosecutors determined that Paxful could pay no more than $4 million. Sentencing is scheduled for February 10, 2026.