A crypto trading platform, Paxful Holdings Inc., pled guilty to criminal charges in the U.S., stemming from the platform’s use as a payment system to facilitate other criminal activity including fraud, prostitution and the sale of child pornography.
In a U.S. district court, the company pled guilty to conspiring to violate anti-money laundering rules, conspiring to operate an unlicensed money transfer business and conspiring to violate the Travel Act by promoting illegal prostitution through interstate commerce.
According to the plea agreement, from July 2015 to June 2019, Paxful and its founders marketed the company as a platform that did not require know-your-customer (KYC) information; developed fake anti money-laundering policies that they knew were not implemented or enforced; and failed to file suspicious activity reports, despite knowing that the platform’s users were engaged in suspicious and criminal activity.
“As a result of its illegal conduct, the virtual currency platform was used to transfer the proceeds of fraud schemes, illegal prostitution, hacks by malign state actors and distribution of child sexual abuse material,” U.S. authorities alleged.
According to court filings, “Paxful knew that its customers transmitted funds from criminal offenses, including fraud schemes and illegal prostitution,” U.S. authorities alleged — and, between Jan. 1, 2017, to Sept. 2, 2019, Paxful facilitated more than 26.7 million trades and collected more than US$29.7 million in revenue, they said.
However, under its guilty plea, the company is only required to pay a criminal penalty of US$4 million, “based on its ability to pay.”
According to the U.S. Department of Justice, while the company agreed that the appropriate penalty based on its conduct was US$112.5 million, which included a 25% discount for cooperation, its analysis determined that it couldn’t pay a penalty greater than US$4 million without threatening its viability.
The court will formally sentence Paxful on Feb.10, 2026.
“Paxful made millions of dollars in part by knowingly moving cryptocurrency for the benefit of fraudsters, extortionists, money launderers and purveyors of prostitution,” said Matthew Galeotti, acting assistant attorney general in the U.S. Justice Department’s criminal division, in a release.
“The [company] attracted its criminal clientele by promoting its lack of anti-money laundering controls and its deliberate decision not to identify its customers,” he added.