TLDR
- Paxful agreed to pay $4 million after pleading guilty to promoting illegal prostitution, transmitting criminal funds, and violating anti-money laundering laws
- The crypto exchange processed nearly $3 billion in trades from 2017 to 2019 while knowingly serving criminal customers including illegal prostitution site Backpage
- Prosecutors originally sought $112.5 million but reduced the fine to $4 million based on Paxful’s ability to pay
- Paxful marketed itself as a non-KYC platform and falsely presented anti-money laundering policies it never enforced
- The peer-to-peer exchange shut down operations in November 2023 after earning $2.7 million in profits from illegal prostitution sites
The US Department of Justice announced Wednesday that crypto exchange Paxful has been sentenced to pay $4 million after pleading guilty to multiple criminal charges. The peer-to-peer platform admitted to conspiring to promote illegal prostitution, knowingly transmitting funds from criminal activity, and violating anti-money laundering requirements.
Virtual Asset Trading Platform Sentenced for Violating the Travel Act and Other Federal Criminal Charges https://t.co/Orm3CQMqgP
— Criminal Division (@DOJCrimDiv) February 11, 2026
According to prosecutors, Paxful operated from January 2017 to September 2019 and facilitated over 26 million trades worth nearly $3 billion. During this period, the company collected more than $29.7 million in revenue while knowingly serving criminal customers.
The Justice Department said Paxful deliberately marketed itself as a platform that did not require customer information. The company presented anti-money laundering policies that it knew were never actually implemented or enforced.
“Paxful profited from moving money for criminals that it attracted by touting its lack of anti-money laundering controls,” said Andrew Tysen Duva, assistant attorney general of the Justice Department’s Criminal Division. The criminals using the platform were engaged in fraud, extortion, prostitution, and commercial sex trafficking.
One of Paxful’s major customers was Backpage, a classified advertising website that authorities shut down for hosting illegal prostitution ads. The Justice Department revealed that Paxful’s founders openly discussed the “Backpage Effect” and how it helped their business grow.
Profiting from Illegal Activity
Between 2015 and 2022, Paxful’s collaboration with Backpage and a similar site generated $2.7 million in profits for the crypto platform. This relationship became a central part of the criminal case against the company.
Prosecutors determined that the appropriate criminal penalty for Paxful should have been $112.5 million. However, they reduced the fine to $4 million after assessing the company’s financial situation and determining it could not pay the larger amount.
“This sentence sends a clear message: companies that turn a blind eye to criminal activity on their platforms will face serious consequences under US law,” said US Attorney Eric Grant for the Eastern District of California. The reduced penalty reflects the current state of Paxful’s finances.
Platform Shutdown and Fallout
Paxful shut down its operations in November 2023. In a blog post published in October, the company blamed the closure on lasting impacts from misconduct by former co-founders Ray Youssef and Artur Schaback before 2023.
The company also cited unsustainable operational costs from extensive compliance remediation efforts. The post has since been deleted from Paxful’s website.
Youssef responded to the shutdown announcement by stating that the company “should have closed down when I left the company two years ago.” His departure came before the criminal charges were filed.
The Paxful platform allowed customers to negotiate trades of digital assets for cash, prepaid cards, and gift cards. Founders marketed the site as a way to avoid Bank Secrecy Act anti-money laundering requirements.
The case represents one of several enforcement actions by federal prosecutors against crypto platforms accused of facilitating illegal activity. Paxful pleaded guilty to the charges in December 2024 before receiving its sentence in February 2026.
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