The co-founder and former chief technology officer (CTO) of Paxful Inc. pleaded guilty to conspiracy to fail to maintain an effective anti-money laundering (AML) program.
According to court documents, from July 2015 to June 2019, Artur Schaback, 36, of Tallin, Estonia, used Paxful Inc. to operate Paxful, an online peer-to-peer virtual currency platform and money transmitting business where customers negotiated for and traded virtual currency for a variety of other items, including fiat currency, pre-paid cards, and gift cards.
During this time, Schaback allowed customers to open accounts and trade on Paxful without gathering sufficient know-your-customer (KYC) information; marketed Paxful as a platform that did not require KYC; presented fake AML policies to third parties that he knew were not, in fact, implemented or enforced at Paxful; and failed to file a single suspicious activity report, despite knowing that Paxful users were perpetrating suspicious and criminal activity.
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.
Schaback pleaded guilty to conspiracy to willfully fail to establish, develop, implement, and maintain an effective AML program as required by the Bank Secrecy Act. He is scheduled to be sentenced on November 4 and faces a maximum penalty of five years in prison.
A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
Schaback will also resign from Paxful Inc.’s Board of Directors.
