Skip to content Skip to sidebar Skip to footer

REGULATION | Paxful Co-Founder Pleads Guilty to Accusations of Deception and Shoddy Anti Money Laundering Practices

Former Paxful Chief Technology Officer (CTO) and co-founder Artur Schaback has entered a guilty plea to criminal offences in the US.

The Department of Justice (DOJ) in the United States declared on July 8, 2024, that Schaback had entered a guilty plea to conspiracy charges for neglecting to create and maintain a successful anti-money laundering (AML) programme that supervised the company’s peer-to-peer (P2P) cryptocurrency trading platform from July 2015 to June 2019. Schaback allowed individuals to open accounts and make trades without requiring the necessary documentation, according to court records. The DOJ claims that Schaback further misrepresented the Paxful platform as not requiring KYC compliance and gave phoney AML policies to other parties.

In addition to marketing Paxful as a platform free of KYC requirements, the DoJ claimed that Schaback “allowed customers to open accounts and trade on Paxful without gathering sufficient [KYC] information,” presented third parties with fictitious AML policies that he knew were not actually implemented or enforced at Paxful, and failed to file a single suspicious activity report despite knowing that Paxful users were engaging in questionable and illegal activity.

“Schaback made Paxful available as a vehicle for money laundering, sanctions breaches, and other criminal activities, including fraud, romance scams, extortion schemes, and prostitution,” the Justice Department stated, citing his inability to execute AML and KYC programmes.

Schaback’s sentence is set for November 4, 2024, and he might spend up to five years in prison. Schaback will step down from the Board of Directors of Paxful Inc. as part of his plea agreement. Schaback sued Paxful’s co-founder and CEO, Ray Youssef, in January 2023, alleging that he had embezzled corporate finances, laundered money, and avoided US sanctions against Russia.

As to Youssef’s announcement, the site declared its closure in April 2023, citing “key staff departures and regulatory challenges.” But the company declared a return of business a month later.

Roshan Dharia is the company’s CEO at the moment.

In January 2021 and June 2022, Nigerians traded over $1.16 billion in bitcoin on Paxful, one of the top peer-to-peer cryptocurrency exchanges in Africa, despite the Central Bank of Nigeria’s (CBN) prohibition on cryptocurrency trading.

Be the first to know

Get the best of all crypto news updates coming from Nigeria, Kenya, SA, Ghana, and across Africa

Show CommentsClose Comments

Leave a comment