Paxful Co-founder Pleads Guilty To AML Violations, Faces Jail Term

As per the latest press release from the U.S. Department of Justice on Monday, July 8, Paxful co-founder Artur Schaback has pleaded guilty to conspiracy and failing to maintain the platform’s anti-money laundering (AML) program. As a result, Artur Schaback has to immediately resign from Paxful’s board and will be facing a sentence later this year in November.

Paxful Co-founder Bypassed KYC Verification

The latest report from DoJ stated that Artur Schaback operated the crypto trading platform Paxful for nearly four years between July 2015 to June 2019 wherein he allowed customers to open accounts without gathering sufficient KYC information.

The authorities also accused Schaback of marketing Paxul as a platform that doesn’t require KYC and presented fake AML policies to third parties without any actual implementation taking place at Paxful. Furthermore, Paxful didn’t report any suspicious activity despite the evidence of wrongdoing by its users. In their filing, the DoJ stated:

“Schaback made Paxful available as a vehicle for money laundering, sanctions violations, and other criminal activity, including fraud, romance scams, extortion schemes, and prostitution”.

Paxful and Schaback’s co-conspirator also “created exemptions to AML and KYC policies based on Paxful customers’ trading volumes and their relationships,” as per the filing.

Also Read: Alexander Vinnik Pleads Guilty in $9 Billion Crypto Laundering Case

Artur Schaback Faces Five Years of Jail Term

Schaback has pleaded guilty to willfully failing to establish and implement effective AML programs as required by the Bank Secrecy Act. He will be sentenced later this year on November 4 and faces a maximum penalty of five years in prison.

On Monday, a plea agreement submitted to a California District Court revealed that government prosecutors proposed a $5 million fine for Schaback, to be paid in three installments: $1 million upon his guilty plea, $3 million at his sentencing, and the remaining $1 million within two years thereafter.

Last year in March 2023, Schaback sued his co-founder and Paxful’s former CEO Mohamad (Ray) Youssef over having control of the exchange and misappropriation of company funds.

Also Read: EU Parliament Passes AML Regulation