Paxful fined $4 million for anti-money laundering violations, with the U.S. Department of Justice stating it profited from the flow of criminal funds

Odaily Planet Daily reports that the U.S. Department of Justice announced that the cryptocurrency trading platform Paxful Holdings Inc. has been fined $4 million for failing to establish effective anti-money laundering controls. Prosecutors accused the platform of allowing illegal funds related to scams, prostitution, and human trafficking to flow through the platform over an extended period, profiting from it.

The Department of Justice stated that Paxful was aware that some customer funds involved criminal activities but continued to provide services, using lax anti-money laundering regulations as a selling point to attract users. The investigation also revealed that the platform processed cryptocurrency transactions for websites including Backpage, which was believed to be used for posting prostitution-related ads involving minors.

Data shows that between 2015 and 2022, approximately $17 million worth of Bitcoin was transferred to related websites through Paxful wallets, with the platform earning at least $2.7 million in profit. The Department of Justice said that Paxful’s founder even referred to the business growth resulting from this as the “Backpage effect.”