HomeNEWSPaxful co-founder pleads guilty to money laundering charges, faces up to 5yrs...

Paxful co-founder pleads guilty to money laundering charges, faces up to 5yrs jail term


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The co-founder of Paxful, Arthur Schaback has pleaded guilty to money laundering charges. Schaback filed the plea to a federal court in California on Monday. The development marks a huge development in the ongoing inquiry into the activities of cryptocurrency exchanges. 

In the plea, the former chief technology officer and co-founder admitted that he failed in his capacity to ensure the effective implementation of some anti-money laundering policies. As per the U.S. Department of Justice, Schaback while managing Paxful between July 2015 and June 2019 let down the guard of the crypto exchange against illicit activities. 

Under his watch, bad actors used the platform for fraud, dating scams, money laundering, extortion, and other criminal activities. The DOJ explained how the co-founder permitted customers to register on the platform and trade virtual assets without providing enough know-your-customer (KYC) information.

Further allegations against Schaback include how he presented Paxful as a no-KYC platform. Also, the co-founder submitted misleading AML policies to third parties, while failing to report the illicit activities on the platform. 

The Department of Justice ruled that the actions of the former chief technology officer exposed the cryptocurrency exchange to numerous unlawful activities. Additionally, the DOJ stated that Schaback made Paxful a tool for illegal transactions by refusing to implement good KYC and AML procedures. 

Schaback To Resign From Paxful And Pay $5 Million Fine  

After pleading guilty to the charges, Schaback could receive a maximum sentence of five years in prison. The sentencing is slated to be held by November 4, 2024, by a federal district court judge. However, the judge is expected to put into consideration the U.S. Sentencing Guidelines and other statutory factors. 

Meanwhile, in the plea deal, Schaback has accepted to pay a fine of $5 million in three installments. The first payment will surface on the date of his guilty plea, while he will pay $3 million by his sentencing. Consequently, the co-founder will make the last payment of $1 million within the next two years. 

Likewise, Schaback will as well resign from the Paxful board of directors as a result of the turmoil the firm has found itself in recent times. Recall that in 2023, the crypto exchange halted its operations for a while as a result of staff exodus and concerns about customer deposits. 

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David Idowu
David Idowu
David Idowu is a crypto reporter and trader with wealthy years of experience. He believes that blockchain technology has numerous opportunities that are begging for proper utilization. Away from work, David is either reading about World Politics, History or Tech Innovations.

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