Bitcoin exchange Paxful pleaded guilty to three criminal charges on Tuesday, claiming in court that it helped criminals move funds and profit from illegal activities, including prostitution, fraud and sanctions evasion.
A “criminal information” is a formal charging document used when a defendant waives the charge and agrees to plead guilty. In this case, Paxful admitted to violating the Travel Act by promoting illegal prostitution through interstate commerce, operating an unlicensed money transfer business, and failing to implement an anti-money laundering (AML) program as required by the Bank Secrecy Act, the Department of Justice’s Eastern District of California branch announced in a news release Wednesday.
The Justice Department said Paxful made millions by turning a blind eye to crimes occurring on its platform. From 2015 to 2019, Paxful processed nearly $3 billion in transactions and collected more than $29 million in fees. The company was also linked to Backpage, an online classifieds site known for illegal sex work. Investigators said nearly $17 million in bitcoin moved from Paxful to Backpage and a similar site, with Paxful making at least $2.7 million.
Instead of preventing abuse, prosecutors said Paxful actively marketed its lack of identity and compliance checks to attract users seeking to evade detection. The company failed to report suspicious activity, falsified its compliance policies, and facilitated transfers from high-risk jurisdictions, including Iran and North Korea.
While the Justice Department determined that Paxful’s criminal conduct warranted a fine of $112.5 million, that figure was reduced to $4 million after prosecutors evaluated the company’s current financial situation, the Justice Department said.
“The defendant attracted his criminal clientele by promoting his lack of anti-money laundering controls and his deliberate decision not to identify his clients,” Acting Assistant Attorney General Matthew R. Galeotti said in a statement.
The company will be sentenced in February 2026. Its former chief technology officer, Artur Schaback, also pleaded guilty last year to related AML violations. The case was part of a joint investigation by the Department of Justice, the IRS Criminal Investigation division, Homeland Security Investigations and FinCEN.
