Paxful Hit With $4M Penalty Over Criminal Fund Transfers

Crypto News Regulation

DOJ Hits Paxful With $4 Million Penalty Over Criminal Fund Transfers

Written by Aaron S.,

Editor-In-Chief

Last Updated: February 12, 2026

Key Takeaways

Paxful faces a $4 million penalty after admitting it gained revenue from criminal transactions on its peer-to-peer crypto platform;
Prosecutors said Paxful promoted weak checks, ignored key rules, and drew in criminals by claiming it did not require customer details;
Paxful linked its growth to Backpage and earned about $2.7 million through ties with sites connected to illegal prostitution ads.

Stop overpaying - start transferring money with Ogvio. Sign up, invite friends & grab Rewards now! 🎁

DOJ Hits Paxful With $4 Million Penalty Over Criminal Fund Transfers

BITDEGREE IN YOUR SOCIAL FEED

US officials announced that Paxful must pay a $4 million penalty after the company admitted it earned money from criminal activity that passed through its peer-to-peer crypto marketplace.

The Justice Department said the firm accepted responsibility for allowing these transactions because it did not enforce required checks on users.

Paxful pleaded guilty in December 2025 to charges that included helping send funds that came from criminal conduct and ignoring federal rules designed to prevent money laundering.

What is a Crypto Wallet? (Explained With Animation)

Did you know?

Want to get smarter & wealthier with crypto?

Subscribe - We publish new crypto explainer videos every week!

Andrew Tysen Duva, the assistant attorney general of the Justice Department’s Criminal Division, said that Paxful is a platform with no effective anti-money-laundering controls, which attracted criminals.

The Justice Department noted that Paxful agreed that the appropriate criminal penalty would be $112.5 million. However, prosecutors determined the company could not pay that amount, which led to the reduced $4 million figure.

Authorities also stated that Paxful promoted itself as a service that did not require customer details. The company displayed anti-money laundering policies, but prosecutors said Paxful knew these rules were not applied or enforced.

Investigators pointed to one client in particular: Backpage, a classified ads site that was shut down for hosting illegal prostitution ads. They added that Paxful’s ties to Backpage and a similar site from 2015 to 2022 generated roughly $2.7 million in profit.

Braden John Karony, former CEO of SafeMoon, was recently sentenced to 100 months in prison. What happened? Read the full story.