Paxful co-founder faces 5 years in prison after guilty plea in AML case

Paxful Inc. co-founder Artur Schaback pleaded guilty to charges of deliberately failing to establish and maintain an effective anti-money laundering program on the company’s peer-to-peer crypto trading platform, the U.S. Department of Justice said in a statement on Monday. 

Schaback, as co-founder and former chief technology officer of the company, allegedly operated peer-to-peer crypto trading platform Paxful from July 2015 to June 2019 without collecting effective amounts of know-your-customer information and falsely told users the platform did not require KYC.

Paxful, the company's crypto P2P platform, allowed users to trade cryptocurrencies for various items such as fiat currency or gift cards.

The Paxful co-founder also knowingly provided fake AML policies to third parties and neglected his responsibility to report suspicious activities, the DoJ statement said.

The DoJ further stated that Schaback's negligence caused Paxful to become a front for money laundering, sanctions violations, fraud, and romance scams, among other crimes. Schaback, facing a maximum prison time of five years, is set to be sentenced on Nov. 4. The 36-year-old Estonian citizen will also resign from Paxful Inc.’s board of directors, the statement said.

Meanwhile, the U.S. DoJ’s court filing in March on Schaback’s charges stated that Schaback conspired the failure of establishing AML programs with a co-conspirator, noted as President and Chief Executive Officer of Paxful, Inc., although the latter did not appear in the latest statement.

Schaback held the position of chief operating officer of Paxful until February 2022. The platform briefly closed down in April last year, amid Schaback and CEO Ray Youssef ’s legal dispute over the company’s control.