five years in prison for violating anti-money laundering regulations

Artur Schaback, one of the co-founders of the cryptocurrency exchange Paxful, reached a deal with U.S. prosecutors that could result in a five-year prison sentence for violating anti-money laundering (AML) laws.

You’ll find all the details below.

Prison is one of the consequences of anti-money laundering violations for Paxful co-founder

Artur Schaback, co-founder and former CTO of Paxful, faces life in prison, as predicted five years in prison.

This followed a guilty plea to a conspiracy charge involving the failure to maintain an effective anti-money laundering (AML) program at a cryptocurrency exchange.

On July 8, the U.S. Department of Justice (DoJ) announced that Schaback would be sentenced on November 4 and that he had resigned from the Paxful board.

The guilty plea agreement, filed the same day in California District Court, states that Schaback must pay a fine of 5 million dollars payable in three installments.

One million dollars upon plea, three million dollars at sentencing and the remaining $1 million over two years.

A briefing document from late March outlined the accusations against Schaback.

Specifically, he and a partner, identified only as the “president and CEO” of Paxful, failed to establish an effective anti-money laundering program within 90 days of starting business.

Therefore, in accordance with the requirements Bank Secrecy Act. Furthermore, Schaback did not implement a KYC (Know Your Customer) program to verify the identity of exchange users.

The agent should have collected at least name, date of birth, address and other identifying information. The Justice Department stated the following in the memo:

“Due to its inability to implement AML and KYC programs, Schaback turned Paxful into a vehicle for money laundering, sanctions violations, and other criminal activities, including fraud, romance scams, extortion schemes, and prostitution.”

Paxful’s Identity Verification Issues

The document also noted that between July 2015 and June 2019, Schaback and an associate allowed users to open Paxful accounts and trade without providing sufficient information or identification for verification.

Paxful also promoted itself as a platform that does not require KYC and/or allows purchases to be made without the need to show an ID.

When third parties requested an anti-money laundering policy, Schaback and a partner produced a policy “plagiarized from another institution” that they knew had not been implemented or enforced.

In March 2023, Schaback sued his co-founder and former CEO of Paxful, Mohamad (Ray) Youssef, in the dispute over control of the stock exchange.

He was accused of, among other things, misappropriating company funds, money laundering and evading sanctions.

Youssef stated in an April 2022 blog post that Paxful had accepted a court order Srinivas Rajudirector of the law firm of Richards, Layton and Finger, acting as depositary for the stock exchange.

In May 2023, Paxful was appointed Roshan Dharia as interim CEO.