Crypto Marketplace Co-Founder Faces Prison for Failing to Implement AML Protocols

Artur Schaback, co-founder and former CTO of Paxful, faces up to five years in prison after admitting to failing to implement essential Anti-Money Laundering (AML) protocols at the cryptocurrency exchange.

The U.S. Justice Department revealed that Schaback’s sentencing is set for November 4, following his guilty plea on July 8.

Schaback’s plea deal includes a $5 million fine, payable in three installments: $1 million immediately, $3 million by the sentencing date, and the final $1 million over the next two years. He will also step down from Paxful’s board.

Prosecutors indicated that Schaback, along with Paxful’s then-CEO, neglected to establish a required AML program within the initial 90 days of the business’s operation, as mandated by the Bank Secrecy Act. They also failed to create a Know Your Customer (KYC) process to verify users’ identities.

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This oversight allowed Paxful to be used for money laundering and other illegal activities between July 2015 and June 2019. Schaback and his partner permitted trading on the platform without adequate user verification and falsely advertised Paxful as not requiring KYC.

Alexander Stefanov