Efe Nail Saltık Artur Schaback, co-founder of Paxful, has pleaded guilty to conspiracy and failing to maintain the platform’s anti-money laundering (AML) program, according to a press release from the U.S. Department of Justice (DoJ) on July 8. Schaback will immediately resign from Paxful’s board and faces sentencing in November.
The DoJ’s report stated that Schaback operated Paxful from July 2015 to June 2019, during which time he allowed customers to open accounts without sufficient Know Your Customer (KYC) information. Authorities accused Schaback of marketing Paxful as a platform that did not require KYC verification and presenting fake AML policies to third parties, without actual implementation. Paxful also failed to report suspicious activity despite evidence of wrongdoing by its users.
The DoJ’s filing highlighted that Schaback made Paxful available for money laundering, sanctions violations, and other criminal activities, including fraud, romance scams, extortion schemes, and prostitution. Furthermore, the filing indicated that Schaback and his co-conspirator created exemptions to AML and KYC policies based on Paxful customers’ trading volumes and their relationships.
Schaback’s guilty plea and the subsequent legal actions underscore the importance of robust AML and KYC practices in the cryptocurrency industry. The case serves as a warning to other crypto platforms about the severe consequences of failing to comply with regulatory requirements and facilitating illegal activities.
Schaback’s sentencing later this year will likely determine the extent of the legal repercussions he will face, potentially including a significant jail term. This development also signals increased scrutiny and enforcement actions by regulatory bodies against crypto platforms that do not adhere to established legal and ethical standards.