Artur Schaback, Paxful’s co-founder and former CTO, pleaded guilty to conspiracy to deliberately fail to establish a compliant AML program as required by the Bank Secrecy Act.
The DOJ stated that Schaback neglected to collect necessary KYC information from customers between July 2015 and June 2019, promoted Paxful as a platform not requiring KYC, misrepresented AML policies, and failed to file suspicious activity reports.
His actions allowed Paxful to become a “vehicle” for money laundering, sanctions violations, and other criminal activities. Schaback’s sentencing, which carries a maximum penalty of five years in prison, will be determined by a federal district court judge. He will also step down from Paxful Inc.’s Board of Directors.
Paxful marketed itself as a platform without KYC requirements. When third parties asked for an AML policy, Schaback and his co-conspirator provided a plagiarized one they knew wasn’t enforced.
Exceptions to AML and KYC policies were made based on customers’ trading volumes and their relationships with Schaback or his co-conspirator.
The Justice Department stated that these failures allowed Paxful to facilitate money laundering, sanctions violations, and various criminal activities, including fraud and extortion.
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