Artur Schaback, the co-founder and former chief technology officer of Paxful Inc., has pleaded guilty to conspiracy for failing to maintain an effective anti-money laundering (AML) program. Between July 2015 and June 2019, Schaback operated Paxful, a peer-to-peer virtual currency platform, without implementing sufficient know-your-customer (KYC) measures. He marketed Paxful as a platform that didn’t require KYC, provided false AML policies to third parties, and failed to file any suspicious activity reports despite knowing about illicit activities on the platform.
Schaback’s negligence allowed Paxful to become a conduit for various criminal enterprises, including money laundering, sanctions violations, fraud, and extortion. His actions posed significant risks to both individual users and the broader financial system, leading to serious regulatory concerns. The failure to enforce AML and KYC measures ultimately made it easier for criminals to exploit the platform for their activities.
As part of his plea, Schaback faces a maximum penalty of five years in prison, with sentencing scheduled for November 4. The case is being prosecuted by multiple federal agencies, including the Justice Department and the IRS Criminal Investigation division, under an Organized Crime Drug Enforcement Task Forces (OCDETF) investigation. This initiative aims to dismantle high-level criminal networks that threaten U.S. financial integrity.
In addition to his guilty plea, Schaback will resign from Paxful’s Board of Directors. The prosecution underscores the importance of adhering to financial regulations, particularly in the rapidly evolving cryptocurrency sector, where the lack of oversight can lead to significant vulnerabilities and criminal exploitation.
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