The U.S. Department of Justice recently announced that Artur Schaback, the co-founder and former chief technology officer (“CTO”) of Paxful Inc., pleaded guilty to charges related to anti-money laundering (“AML”) failures. He specifically pleaded guilty to conspiracy to willfully failing to establish, develop, implement, and maintain an effective AML program as required by the Bank Secrecy Act (“BSA”). As part of his plea, Schaback agreed to resign from Paxful’s Board of Directors. He is currently scheduled to be sentenced on November 4, 2024.
The DOJ describes Paxful as an “online peer-to-peer virtual currency platform and money transmitting business where customers negotiated for and traded virtual currency for a variety of other items, including fiat currency, pre-paid cards, and gift cards.” According to federal prosecutors, Paxful was a financial institution that was subject to the requirements of the BSA. Between July 2015 and June 2019, Schaback allegedly made the company a vehicle for money laundering, sanctions violations and other financial crimes by allowing customers to open accounts and trade on the platform without collecting sufficient know-your-customer (“KYC”) information as the BSA required. Schaback also allegedly violated the BSA by marketing Paxful as a platform without KYC requirements; presenting third parties with a fake set of AML policies that he knew were not implemented and enforced by the company; and failing to submit a single suspicious activity report despite having knowledge that certain customers were engaged in suspicious and/or criminal activity.