FinCEN Fines Paxful $3.5 Million for Enabling Over $500 Million in Illicit Crypto Transfers
FinCEN has fined Paxful $3.5 million for willfully enabling suspicious cryptocurrency transfers exceeding $500 million. The transactions were linked to illicit activities and high-risk jurisdictions including Iran, North Korea, Venezuela, and Backpage.com. Paxful allegedly failed to comply with key Bank Secrecy Act requirements, such as Money Services Business registration, maintaining an effective anti-money laundering program, and filing suspicious activity reports.
The peer-to-peer marketplace shut down in 2023 amid increasing regulatory pressure, staff departures, and internal legal disputes. The consent order cited significant compliance failures and leadership deficiencies over years of inadequate oversight. As part of its response, Paxful terminated senior personnel and undertook an internal review to identify previously unreported suspicious activities, taking corrective measures to address misconduct.
The enforcement involved multiple regulators including the DOJ Money Laundering and Narcotics Section, the U.S. Attorney for the Eastern District of California, and Homeland Security Investigations, with FinCEN issuing the penalty. FinCEN emphasized the need for cryptocurrency companies to enhance controls to match crypto-related risks, particularly concerning exposure to sanctioned jurisdictions and anonymous transfers.
Paxful CEO Ray Youssef attributed the platform's shutdown to a combination of staff losses, heightened US regulatory requirements, and a lawsuit by co-founder Artur Schaback. He stated that the increasing compliance demands and blocking of US users made a full suspension of the marketplace unavoidable.
