Paxful Inc. Co-Founder Pleads Guilty to Conspiracy Charges Over Anti-Money Laundering Failures 

Artur Schaback, the co-founder, and former Chief Technology Officer (CTO) of Paxful Inc., pleaded guilty yesterday to conspiracy charges related to his failure to maintain an effective anti-money laundering (AML) program. There are significant efforts being made to regulate virtual currency platforms and ensure compliance with the financial laws. 

The conspiracy consists of consciously failing to establish, develop, implement, and maintain an effective AML program, as mandated by the Bank Secrecy Act. He faces a maximum penalty of five years in prison. Additionally, Schaback is resigning from Paxful Inc.’s Board of Directors. 

So, what specifically took place? From July 2015 to June 2019, Schaback operated Paxful, an online peer-to-peer virtual currency platform where users could trade virtual currencies for fiat currency, prepaid credit cards, and gift cards. However, Schaback failed to implement the necessary Know-Your-Customer (KYC) protocols, allowing customers to open accounts and conduct trades without proper verification. He even marketed Paxful as a platform that did not require KYC. This act deceived third parties with fake AML policies that were neither implemented nor enforced. 

The lack of regulatory oversight left Paxful to become a machine for money laundering, sanctions violations, and other criminal activities, including fraud, romance scams, extortion schemes, and even prostitution. Despite being aware of the suspicious and criminal activities taking place on Paxful the entire time, Schaback failed to file a single suspicious activity report. 

These types of schemes should be reported if seen. If you believe you have information about potential financial fraud, you can speak to an experienced Constantine Cannon whistleblower lawyer team member. Please do not hesitate to contact us for a free and confidential consultation.