Paxful Co-Founder Pleads Guilty to AML Program Failures

Arthur Schapak, Paxful co-founder and former CTO, pleaded guilty to conspiracy to willfully fail to establish, develop, implement, and maintain a compliant anti-money laundering program as required by the Bank Secrecy Act.

In a statement, the US Department of Justice’s Office of Public Affairs revealed that Shabak failed to collect necessary KYC information for customers who opened trading accounts on Paxful from July 2015 to June 2019.

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The former executive is accused of marketing Paxful as a no-KYC platform, falsely presenting anti-money laundering policies to third parties, knowing they were not enforced, and failing to file any suspicious activity reports.

In neglecting to implement anti-money laundering and know-your-customer programs, the Department of Justice He said The 36-year-old Estonian resident allowed Paxful to become a “vehicle” for money laundering, sanctions violations, and a variety of other criminal activities, including fraud, romance scams, extortion schemes, and prostitution.

“Shabak pleaded guilty to conspiracy to willfully fail to establish, develop, implement and maintain an effective anti-money laundering program as required by the Bank Secrecy Act.”

Schapak is scheduled to be sentenced on November 4. The maximum possible sentence is five years in prison. That will be decided by a federal district court judge, who will consider U.S. sentencing guidelines and other legal elements. At the same time, Schapak will also step down from Paxful Inc.’s board of directors.