Bitcoin Exchange Paxful Agrees to Plead Guilty, Hit With $7.5 Million in Penalti

[Oshosondy]

I thought Paxful was closing down? I am not using the exchange so I do not know how far it is now.

But just not long, I read about the exchange that it has been hit with $7.5 million because the exchange was used for money laundering.

Paxful pleaded guilty to federal charges and will pay $7.5 million total in criminal and civil penalties for enabling money laundering and criminal activity on its Bitcoin exchange.

The platform processed $3 billion in trades, authorities say, including $17 million to illegal prostitution sites and $500 million involving sanctioned countries like Iran and North Korea.

Paxful deliberately avoided compliance controls and failed to identify customers or report suspicious activity, the DOJ alleged, with co-founder Artur Schaback also pleading guilty in July 2024.

$4 million will be paid in criminal penalty to the U.S. Department of Justice. $3.5 million civil penalty handed down by the Financial Crimes Enforcement Network on Tuesday.

https://decrypt.co/351913/bitcoin-exchange-paxful-agrees-plead-guilty-7-5-million-penalties

[JeromeTash]

It was quite evident that something or some external was behind their forced/hurried shutdown. I guess they received notifications or threats from law enforcement and this made them to try to cease operations.

Who next? Localcoinswap? HodlHodl or noones?

[rat03gopoh]

Interesting, so what's the next scenario? A guaranteed pardon from a politician upon taking office? A legal shitscamtoken vol. 2? This is similar to the story of the infamous exchange owner.

Who next? Localcoinswap? HodlHodl or noones?

Maybe, if this scenario is to repeat itself, they should confess before being sued.

[SFR10]

I thought Paxful was closing down? I am not using the exchange so I do not know how far it is now.

It appears that apart from being on "withdrawal-only mode", they did halt all of their other operations last month ^{[here are the announcements on X and on their blog (archived version)]}.
^{- BTW, back in October, they mentioned "only a few percent" of their users still have funds in their platform.}

[coupable]

Who next? Localcoinswap? HodlHodl or noones?

They are all threatened with closure as part of the campaign against privacy and semi-privacy services, which has been targeting them for some time as part of a targeted campaign. And the accusations are almost the same to all of them. We all know how much easier to accuse any peer-to-peer service to facilitate money lundering with evidences that the service can't be responsible of. Authorities can at extreme cases apply penaltis without forcing the service to shut down.

[NotATether]

Who next? Localcoinswap? HodlHodl or noones?

They are all threatened with closure as part of the campaign against privacy and semi-privacy services, which has been targeting them for some time as part of a targeted campaign. And the accusations are almost the same to all of them. We all know how much easier to accuse any peer-to-peer service to facilitate money lundering with evidences that the service can't be responsible of. Authorities can at extreme cases apply penaltis without forcing the service to shut down.

Then people will just resort to P2P trading via telegram and WhatsApp channels with their providers.

It's not like you can stamp out P2P trading.

There's no escrow there though, so risky but it's doable.

[coupable]

Who next? Localcoinswap? HodlHodl or noones?

They are all threatened with closure as part of the campaign against privacy and semi-privacy services, which has been targeting them for some time as part of a targeted campaign. And the accusations are almost the same to all of them. We all know how much easier to accuse any peer-to-peer service to facilitate money lundering with evidences that the service can't be responsible of. Authorities can at extreme cases apply penaltis without forcing the service to shut down.

Then people will just resort to P2P trading via telegram and WhatsApp channels with their providers.

It's not like you can stamp out P2P trading.

There's no escrow there though, so risky but it's doable.

Users will always find a way far from the authority eyes as many of them don't find local sellers/buyers in the knowm P2P platforms.
In my country, an active discord channel has been grown since about a year, containing a consideranle user base of few thousands of users who restort to a long list of confirmed trusted buyers/sellers. The trust in this lost is confirmed by the community and the payments are made via local methods. I use this service since months without any problem but the risk is always there since it's not possible to report to authorities about possible disputes.

[Darker45]

Not only closing down, it has already closed shop. But it doesn't mean it can't anymore be held liable for crimes committed while in operation. Shutting down doesn't give them a free pass. But I'm sure Paxful still has assets. They can easily pay the penalties. They're lucky the DoJ was kind enough to reduce the penalty from $112.5 million to $4 million.

I'm thinking about NoOne's Youssef's criminal liability in all this. He was Paxful's CEO while all these crimes took place. Will he also be fined? Will a case be filed against him?

[un_rank]

Then people will just resort to P2P trading via telegram and WhatsApp channels with their providers.
...

The aim is probably to keep it a minimum.

A lot of people will rather look for P2P on a centralized platform where the provider still functions as an intermediary than to trade on telegram with the high risk there. Except you have built a prior relationship with a trusted person, no one should be trading on telegram, even with that there is still a high risk.

- Jay -

[tabas]

I think even before this verdict has came out, the paxful executives have seen this coming. So even before it has been released for them to take it as guilty and have been used for the money laundering, they've already mentioned their closure so people won't be thinking of any other reasons but that business isn't doing well. So, we're having an idea that most of these exchanges, p2p and not could be part of this bigger ring and unknowingly have been used to process with millions of money that were stolen from people through hack.

[avp2306]

Not only closing down, it has already closed shop. But it doesn't mean it can't anymore be held liable for crimes committed while in operation. Shutting down doesn't give them a free pass. But I'm sure Paxful still has assets. They can easily pay the penalties. They're lucky the DoJ was kind enough to reduce the penalty from $112.5 million to $4 million.

I'm thinking about NoOne's Youssef's criminal liability in all this. He was Paxful's CEO while all these crimes took place. Will he also be fined? Will a case be filed against him?

They still have asset since issue is not about lacking of funds or insolvency.

They are so smart to do counter action towards the situation they are facing and they just plead guilty just to lower down their penalties and other obligations.

What's crazy is there's none criminal charges filed against Youssef, but rather the charges has been filed to his co - founder which he admit that he fail to implement proper KYC control.

[Z-tight]

They're lucky the DoJ was kind enough to reduce the penalty from $112.5 million to $4 million.

The article says that $4m is the amount that Paxful can reasonably pay. I believe that means that DOJ were never getting $112.5m off Paxful. Pleading guilty would surely also have had a part to play in the reduction of the penaties.

Then people will just resort to P2P trading via telegram and WhatsApp channels with their providers.

That is a difficult one. I don't think i would ever want to trade my BTC on social media, neither would i recommend it. I also hope that is not the where we are headed with the everlasting attack on privacy services.

[noorman0]

-snip-
Then people will just resort to P2P trading via telegram and WhatsApp channels with their providers.

Telegram isn't immune to government censorship either. Remember why the former CEO was arrested at a French airport?
And I don't think we can expect much from Zuckerberg, as he's been involved in several high-profile court cases in the past.

[coupable]

-snip-
Then people will just resort to P2P trading via telegram and WhatsApp channels with their providers.

Telegram isn't immune to government censorship either. Remember why the former CEO was arrested at a French airport?
And I don't think we can expect much from Zuckerberg, as he's been involved in several high-profile court cases in the past.

Telegram, Discord, facebook, or any other social media would be used as a communication tool only. Nothing will be posted in any of those channels and all deals can be made in private. Authorities can't easy catch them or stop them if users can always manage an alternative channel in case of possible disconnection. Unless the app team itself starts censorship of content which will significantly damage its reputation, the authorities has few options to ban those marketplaces running in different social media apps.

[hugeblack]

These allegations date back to 2024, the Biden administration, a period marked by intense scrutiny of privacy-related matters. Law enforcement was highly active, with new cases being announced almost weekly. Here are more details about the case:

Consistent with FinCEN’s Statement on Enforcement of the BSA—and as outlined in the Consent Order—FinCEN considered a variety of factors in determining the appropriate penalty for this matter. These included mitigating factors, such as Paxful’s decision to terminate its relationship with the leadership who oversaw Paxful’s operations at the time the violations occurred, and the company’s remediation efforts, including conducting a review to identify and report previously unreported suspicious activity that Paxful processed during the relevant period.