Paxful co-founder Artur Schaback faces up to five years in prison for failing to comply with anti-money laundering regulations.
Artur Schaback, one of the co-founders of the exchange Paxful, has accepted a plea deal with U.S. prosecutors that could result in a maximum sentence of five years in prison.
On July 8, the U.S. Department of Justice announced that Schaback, former CTO of Paxful, will be sentenced on November 4 and will resign from the company’s board of directors.
Violations of AML and KYC regulations
According to legal documents filed last March, Schaback, along with Paxful’s President and CEO Mohamad (Ray) Youssef, failed to establish an effective anti-money laundering (AML) program within 90 days of commencing operations, as required by the Bank Secrecy Act. Additionally, an adequate Know Your Customer (KYC) procedure to verify the identity of the platform’s users was not implemented.
In the official statement, the DoJ stated:
“As a result of his failure to implement AML and KYC programs, Schaback made Paxful available as a vehicle for money laundering, sanctions violations, and other criminal activity, including fraud, romance scams, extortion schemes, and prostitution.”
Between July 2015 and June 2019, users were able to open accounts and trade digital assets without providing sufficient identifying information. Additionally, Paxful promoted itself as a platform that did not require KYC, allowing purchases without identification.
Legal disputes
In March 2023, Schaback filed a lawsuit against his co-founder Mohamad (Ray) Youssef. The litigation concerned control of the company with allegations of misappropriation of company funds, money laundering, and sanctions violations. In May 2023, Paxful appointed Roshan Dharia as interim CEO.
