Federal court sentences Paxful for criminal violations
A federal court ordered Paxful Holdings to pay $4 million in criminal penalties after the company pleaded guilty to multiple offenses. The peer-to-peer Bitcoin trading platform admitted to conspiracy to support illegal prostitution, violating the Bank Secrecy Act, and knowingly transmitting funds from unlawful activities. Paxful reached agreements in December 2025 with the Department of Justice and Financial Crimes Enforcement Network to resolve longstanding investigations into historic conduct. According to the DOJ, Paxful facilitated approximately $3 billion in transactions between 2017 and 2019, generating nearly $30 million in revenue from these operations.
The company knowingly transferred Bitcoin for clients including Backpage, a website that hosted prostitution advertisements and profited from illegal sex work involving minors. Paxful’s founders reportedly boasted about the “Backpage Effect” and its beneficial impact on their business according to DOJ filings. The platform attracted criminal clientele by promoting its lack of anti-money laundering controls and its deliberate decision not to identify customers. Paxful ceased operations in 2023 but continued to face legal consequences for actions under its former leadership prior to shutdown.
Penalty reduced from $112 million due to company's inability to pay
As part of the plea agreement, Paxful conceded that the appropriate criminal penalty for its actions would exceed $112 million. However, the DOJ concluded after an independent financial assessment that the company would be unable to afford a penalty surpassing $4 million. A federal judge confirmed the $4 million criminal fine during a sentencing hearing on February 10, 2026. The settlement also includes a separate $3.5 million civil penalty from FinCEN, bringing total penalties to $7.5 million across both agencies. US attorney Eric Grant stated that “by prioritising profit over compliance, the company allowed money laundering and other criminal activities to flourish.”Grant added that this ruling sends a strong message that firms ignoring criminal actions on their platforms will encounter significant repercussions.
Acting Assistant Attorney General Galeotti said Paxful made millions of dollars by knowingly moving cryptocurrency for fraudsters, extortionists, money launderers, and purveyors of prostitution. The case highlights ongoing regulatory enforcement against cryptocurrency platforms that fail to implement adequate anti-money laundering controls and customer identification procedures.
