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U.S. Department of Justice charges Paxful with $4 million over allegations related to unlawful sex trafficking and money laundering.
The penalty imposed on the crypto platform was significantly lowered due to its financial capacity, as stated by U.S. authorities.
The previous crypto platform Paxful has been penalized in its criminal proceedings. (Jesse Hamilton/CoinDesk)
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Key points:
- The U.S. Department of Justice secured a $4 million penalty from former crypto platform Paxful in a ruling related to evading money-laundering regulations.
- This figure was decreased from an initial $112 million by prosecutors after assessing the company’s inability to afford that amount, according to the DOJ.
Paxful Holdings, which admitted guilt last year to allegations from U.S. officials of enabling illegal prostitution, breaching money-laundering laws, and knowingly managing criminal funds, was ordered to pay a $4 million penalty, significantly reduced due to the company’s current financial situation.
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The peer-to-peer bitcoin marketplace, which was notably favored in Africa, ceased operations in 2023, but Paxful had facilitated approximately $3 billion in cryptocurrency transactions from 2017 to 2019, as reported by U.S. officials, including dealings for Backpage, an advertising site for illicit sex services.
“This ruling conveys a strong message: companies that ignore criminal actions on their platforms will encounter significant repercussions under U.S. law,” stated U.S. Attorney Eric Grant for the Eastern District of California, in a public statement.
On the Paxful platform, users exchanged digital currencies for various items including cash, prepaid cards, and gift cards. The founders were reported to have promoted the platform as a means to circumvent the Bank Secrecy Act’s anti-money-laundering requirements.
Initially, prosecutors considered imposing a fine exceeding $112 million, but it was concluded that the firm could only afford a maximum of $4 million.
Read More: Paxful’s Fall: Questions in the Peer-to-Peer Bitcoin Exchange’s Demise
