Paxful’s co-founder and former chief technology officer (CTO), Artur Schaback, pleaded guilty to conspiracy to deliberately fail in establishing, developing, implementing, and maintaining a compliant AML program as required by the Bank Secrecy Act.
In a statement, the US Department of Justice’s (DOJ) Office of Public Affairs revealed that Schaback failed to collect necessary KYC information of customers who opened accounts to trade on Paxful from July 2015 to June 2019.
DOJ: Schaback Allowed Paxful for Money Laundering, Fraud
The former exec is accused of marketing Paxful as a platform that did not require KYC, misrepresenting AML policies to third parties, knowing they were not being enforced, and failing to file any suspicious activity reports.
In neglecting to implement AML and KYC programs, the DOJ said that the 36-year-old resident of Estonia, allowed Paxful to become a “vehicle” for money laundering, sanctions violations, and various other criminal activities, 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.”
Schaback’s sentencing is scheduled for November 4th. The potential maximum penalty is five years in prison. It will be decided by a federal district court judge, who will consider the US Sentencing Guidelines and other statutory elements. Meanwhile, Schaback will also step down from Paxful Inc.’s Board of Directors.
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