On February 12, the U.S. Department of Justice announced a $4 million fine against peer-to-peer encryption platform Paxful. The company previously admitted that, lacking anti-money laundering and customer due diligence mechanisms, it had long transferred funds for criminals and profited directly from these activities. The related funds are alleged to be connected to human trafficking, scams, extortion, and illegal prostitution activities.
Prosecutors disclosed that between January 2017 and September 2019, Paxful facilitated over 26 million transactions totaling nearly $3 billion, earning approximately $29.7 million in revenue. The Department of Justice pointed out that the company had promoted its platform as “no identity verification required” and published anti-money laundering policies that were not actually implemented, thereby attracting high-risk customers.
Investigations revealed that Paxful had partnerships with the seized illegal classified ad website Backpage and similar platforms. The U.S. Department of Justice stated that its founder privately boasted that the “Backpage effect” drove platform growth. Between 2015 and 2022 alone, such collaborations generated about $2.7 million in profit for the platform.
Initially, prosecutors believed a fine of $112.5 million was appropriate, but considering the company’s cessation of operations and inability to pay, the final penalty was set at $4 million. Paxful shut down at the end of 2025. The company attributed its collapse in a statement to misconduct by former management and high compliance remediation costs.
Former co-founder Ray Youssef responded that the platform had fallen into an irreversible crisis before his departure. Another co-founder and former CTO, Artur Schaback, admitted in 2024 to conspiracy for failing to maintain an anti-money laundering system and is currently awaiting sentencing.
This case is seen as another landmark event in the U.S. strengthening enforcement of crypto compliance, sending a clear signal to the industry: platforms that ignore anti-money laundering obligations will face dual pressure from criminal and regulatory authorities.
Disclaimer: The information on this page may come from third parties and does not represent the views or opinions of Gate. The content displayed on this page is for reference only and does not constitute any financial, investment, or legal advice. Gate does not guarantee the accuracy or completeness of the information and shall not be liable for any losses arising from the use of this information. Virtual asset investments carry high risks and are subject to significant price volatility. You may lose all of your invested principal. Please fully understand the relevant risks and make prudent decisions based on your own financial situation and risk tolerance. For details, please refer to
Disclaimer.
Related Articles
Paul Chan: The first stablecoin issuer licenses will be issued in March, and a draft of the digital asset policy ordinance will be submitted within the year.
Hong Kong Financial Secretary Paul Chan Mo-po revealed in the 2026 Financial Budget that the government will submit a draft digital asset policy regulation to establish a licensing system to regulate digital asset trading and custody services. At the same time, the Securities and Futures Commission will safeguard investors' rights, promote market liquidity, and foster innovation.
GateNewsBot40m ago
The Trump administration is considering requiring banks to collect customer citizenship information.
ChainCatcher reports, citing sources familiar with the matter, that the Trump administration is considering an executive order requiring banks to collect customer citizenship data as part of its immigration enforcement efforts.
Sources say the initiative is primarily being evaluated by the U.S. Department of the Treasury and may ultimately require banks to request a new, unprecedented type of documentation from both new and existing customers wishing to maintain bank accounts in the United States, such as passport information.
GateNewsBot1h ago
Cryptocurrency ATM Regulation Upgrades: Bitcoin Depot Mandates Identity Verification for Each Transaction, US Anti-Fraud and KYC Compliance Tighten Across the Board
February 25 News, U.S. cryptocurrency ATM operator Bitcoin Depot announced that it will implement phased new regulations across its U.S. network starting in early February 2026, requiring users to provide identification for every cryptocurrency ATM transaction to strengthen anti-fraud monitoring and compliance review. This move is seen as an important upgrade in risk control and identity verification mechanisms in the crypto ATM industry amid tightening regulatory environments in the United States.
Bitcoin Depot CEO Scott Buchanan stated that continuous identity verification processes can identify suspicious behavior based on user identity, transaction location, and amount before transaction approval, thereby reducing risks of account sharing, identity theft, and scams. The company previously implemented identity verification requirements for new users in October 2025, and this policy has now been expanded to all transaction scenarios, meaning the standards for real-name verification at crypto ATMs are further tightening.
GateNewsBot1h ago
Putin personally signs new law! Authorizes Russian courts to confiscate Bitcoin and other cryptocurrencies "during investigations"
Russian President Putin has signed a new law defining cryptocurrencies as "intangible property," granting courts the authority to confiscate them during criminal investigations. Experts warn that Russia may block overseas cryptocurrency exchanges to keep the $15 billion in annual fees domestic, demonstrating a dual-track policy towards the crypto market: both legalization and strict regulation.
動區BlockTempo1h ago
New Game in U.S. Cryptocurrency Taxation: Blockchain Association Proposes Tax Exemption for Stablecoins and Small Transactions, Warren Strongly Opposes
February 25 News, the leading cryptocurrency industry lobbying organization, the Blockchain Association, has submitted a cryptocurrency tax reform proposal to Congress and met with House members in an attempt to influence the development of crypto tax laws in 2026. The proposal focuses on key issues such as stablecoin tax treatment, tax exemption thresholds for small crypto transactions, and rules for the wash sale of digital assets.
According to the policy document released by the Blockchain Association, it advocates treating stablecoins as cash for everyday payment scenarios to reduce the tax complexity of daily transactions. At the same time, the association suggests establishing a minimum exemption for "small" crypto transactions, arguing that reporting tiny gains or losses on each transaction increases taxpayers' costs and adds to the administrative burden on U.S. tax authorities, with limited actual tax revenue contribution.
GateNewsBot1h ago
Russia's "Digital Currency and Digital Rights" bill to take effect starting July
The bill drafted by the Russian Central Bank and the Ministry of Finance will take effect in July, allowing only licensed institutions to trade cryptocurrencies, requiring exchanges to register and meet capital requirements. Individual investors can only trade on regulated platforms, with purchase limits and penalties for violations.
GateNewsBot1h ago
