A Schaback, Paxful's ex-CEO, pleads guilty by failed AML

[SilverCryptoBullet]

https://paxful.com/university/artur-schaback-paxful/
https://www.justice.gov/opa/pr/paxful-inc-co-founder-pleads-guilty-conspiracy-fail-maintain-effective-anti-money-laundering

Artur Schaback is a co-founder of Paxful, took over CEO position in Paxful after departure of Ray Youssef to launch a new brand P2P Noones. DOJ are targeting many centralized exchanges, their CEOs, and plead guilty on these platforms and head people in charge of CEO positions.

He is scheduled to be sentenced on Nov. 4 and faces a maximum penalty of five years in prison.

I wonder how they did it with Artur Schaback but did not do anything to Ray Youssef because Paxful has a long history of operation.

Will it be another step to close no KYC P2P marketplaces and no KYC centralized exchanges?
Will DOJ do more attacks to Decentralized exchanges and their CEOs?

[DaveF]

From the DOJ link.

During this time, Schaback allowed customers to open accounts and trade on Paxful without gathering sufficient know-your-customer (KYC) information; marketed Paxful as a platform that did not require KYC; presented fake AML policies to third parties that he knew were not, in fact, implemented or enforced at Paxful; and failed to file a single suspicious activity report, despite knowing that Paxful users were perpetrating suspicious and criminal activity.

What they don't mention is how many warning they got or if Ray Youssef did anything to protect himself.

As a result of his failure to implement AML and KYC programs, Schaback made Paxful available as a vehicle for money laundering, sanctions violations, and other criminal activity, including fraud, romance scams, extortion schemes, and prostitution. 

Does not mention anyone else within the company, so if he changed the direction of how it operated or the way it worked after he came into full control might also play a factor.

i.e. Youssef was 'working' on it but left before anything was implemented.

It's odd that nobody else was mentioned or charged (as of now) so it kind of looks like he was pushing Paxful to operate that way.

-Dave

[Davidvictorson]

Just like Adam Todd, Schaback is another scapegoat for the DOJ but how come these CEOs fail to implement and maintain the anti-money laundering program. I hate it when these silly mistakes which should not have been made are made and it gives the authority more than enough evidence to put them in jail. What would it have these CEOs to fix these small loopholes. And as for Ray Youssef, there's is definitely something that no one is telling us about.

[Charles-Tim]

United States regulators are now looking for more ways to make money from exchanges. We have seen the one for BitMex.

https://cryptopotato.com/crypto-exchange-bitmex-pleads-guilty-to-violating-bank-secrecy-act/

Now Paxful. Which exchange is the next?

Because of this:

According to court documents, from July 2015 to June 2019, Artur Schaback, 36, of Tallin, Estonia, used Paxful Inc. to operate Paxful, an online peer-to-peer virtual currency platform and money transmitting business where customers negotiated for and traded virtual currency for a variety of other items, including fiat currency, pre-paid cards, and gift cards. During this time, Schaback allowed customers to open accounts and trade on Paxful without gathering sufficient know-your-customer (KYC) information; marketed Paxful as a platform that did not require KYC; presented fake AML policies to third parties that he knew were not, in fact, implemented or enforced at Paxful; and failed to file a single suspicious activity report, despite knowing that Paxful users were perpetrating suspicious and criminal activity.

Almost all the exchanges in the past that are not in United States would be guilty of this because users can easily register on the exchanges and not get verified but have limited withdrawal limit.

They now want to target all old exchanges.

[Z-tight]

Will it be another step to close no KYC P2P marketplaces and no KYC centralized exchanges?

So many no-kyc centralized exchanges have already made kyc mandatory, due to pressures from regulators. The DOJ have also charged KuCoin for money laundering through failing to provide efficient kyc procedure. It is obvious that it will be difficult for a no-kyc centralized exchange to operate right now, and as for p2p exchanges, there are still a lot of options you can choose from and they are working fine for now.

[Charles-Tim]

So many no-kyc centralized exchanges have already made kyc mandatory, due to pressures from regulators. The DOJ have also charged KuCoin for money laundering through failing to provide efficient kyc procedure. It is obvious that it will be difficult for a no-kyc centralized exchange to operate right now, and as for p2p exchanges, there are still a lot of options you can choose from and they are working fine for now.

There are also still centralized no KYC exchanges. The last time I was using MEXC like 2 months ago, the daily withdrawal limit for customers that do not get verified is high, although it can be small to some people. Also are still few other exchanges like that. Yes also are some bitcoin and other crypto P2P marketplace like that.

[avikz]

Not a surprised move! Us enforcement agencies have been target in all kinds of exchanges since a long time now. Paxful is just a new edition to the list of exchanges getting sued by US government.

It's unfortunate to see that once called as land of opportunities, has downgraded itself to an authoritarian regime. Centralised or non centralised, all crypto related businesses should consider moving to Singapore.

[SilverCryptoBullet]

There are also still centralized no KYC exchanges. The last time I was using MEXC like 2 months ago, the daily withdrawal limit for customers that do not get verified is high, although it can be small to some people. Also are still few other exchanges like that. Yes also are some bitcoin and other crypto P2P marketplace like that.

MEXC is no longer KYC free. It's KYC mandatory now, since 30 June 2024.

First Binance, then Kucoin, Now MEXC is Going FULL KYC: Your Best Alternative
KYC is mandatory for all MEXC users

WEEX is recommended in the first article but I don't know about WEEX.

[kryptqnick]

From what I understand about the US judicial system, it's very common to take the guilty plea because people fear that otherwise they'll get an even bigger prison sentence. Sometimes even those who aren't guilty might feel threatened by it and plead guilty, but I don't think that's the case with crypto exchanges. CEOs of exchanges are surely resourceful people, so if they plead guilty, it means that it's a good deal for them compared to what they could face.
Looking at the US Department of Justice press release, the problem isn't just that the exchange did not require KYC, but also that they faked their AML policies. And that they did not file any suspicious activities while knowing that they were taking place. So while there is a strong tendency that exchanges must impose KYC, it's not the only violation in this case.

[Jaque8]

So many no-kyc centralized exchanges have already made kyc mandatory, due to pressures from regulators. The DOJ have also charged KuCoin for money laundering through failing to provide efficient kyc procedure. It is obvious that it will be difficult for a no-kyc centralized exchange to operate right now, and as for p2p exchanges, there are still a lot of options you can choose from and they are working fine for now.

There are also still centralized no KYC exchanges. The last time I was using MEXC like 2 months ago, the daily withdrawal limit for customers that do not get verified is high, although it can be small to some people. Also are still few other exchanges like that. Yes also are some bitcoin and other crypto P2P marketplace like that.

Yea, big exchanges like MEXC and KuCoin tend to crack down fast nowadays. I think now smaller platforms like BYDFi and most P2P markets are more likely to keep it going longer, especially if they have under 1M users.

https://kycnot.me/
https://rankfi.com/best-mexc-alternatives/

MEXC was the biggest one that fell, those posts list some updated ones

[AmoreJaz]

Not a surprised move! Us enforcement agencies have been target in all kinds of exchanges since a long time now. Paxful is just a new edition to the list of exchanges getting sued by US government.

It's unfortunate to see that once called as land of opportunities, has downgraded itself to an authoritarian regime. Centralised or non centralised, all crypto related businesses should consider moving to Singapore.

I don't think Singapore would allow non-KYC crypto-exchanges. I believe most legit centralized crypto-exchanges will require kyc to their customers to comply with AML/KYC protocol as required by the area where they are being registered. This country may be open to various crypto-related business but they still need to implement the legalities of it.

[ranochigo]

Almost all the exchanges in the past that are not in United States would be guilty of this because users can easily register on the exchanges and not get verified but have limited withdrawal limit.

They now want to target all old exchanges.

Paxful is registered in the United States, and should come under the jurisdiction for their money laundering laws and the regulations with being a registered money transmitter. If they're not in the United States, then they wouldn't have to conform to US regulations, unless they specifically serve US customers or transmit money within. Else, I would consider cross jurisdiction to be too much of a hassle to bother.

It's unfortunate to see that once called as land of opportunities, has downgraded itself to an authoritarian regime. Centralised or non centralised, all crypto related businesses should consider moving to Singapore.

Singapore is even worse. Applying for the license is notoriously difficult, and Binance just backed out of their application. If you think US is difficult, I'm sure most of the other crypto friendly places are difficult as well.

Also quite extreme to call it authoritarian. If you think flouting the rules and paying for it is being 'authoritarian', then you'd be surprised what an authoritarian regime actually looks like.