Paxful Holdings Inc., known for operating a major peer-to-peer Bitcoin exchange before shutting down in 2023, has agreed to plead guilty to federal charges brought by the U.S. Department of Justice. The company will pay a $4 million criminal penalty, following a $3.5 million civil fine previously imposed by the Financial Crimes Enforcement Network (FinCEN).
According to federal authorities, Paxful facilitated approximately $3 billion in trades between 2017 and 2019, earning more than $29 million while allegedly enabling widespread illegal activity. The platform allowed users to exchange Bitcoin for cash, prepaid cards, and gift cards—methods that investigators say made it easier for criminals to conduct illicit transactions without detection.
Acting Assistant Attorney General Matthew R. Galeotti stated that Paxful profited by processing transactions for criminals, including individuals involved in fraud schemes and prostitution. One of the most serious accusations is that Paxful knowingly handled payments connected to Backpage, an illegal online marketplace, generating significant revenue from the activity.
Federal officials also revealed that Paxful processed more than $500 million in suspicious transactions, including dealings with sanctioned nations, further deepening the severity of the charges. Although the company faced a potential penalty of up to $112.5 million, the DOJ reduced the fine to $4 million due to Paxful’s cooperation and corrective measures taken after the investigation began. Sentencing is scheduled for February 10, 2026.
Paxful’s Role in Facilitating Illicit Transactions
Investigators found that Paxful operated with major compliance failures, allowing users to move large sums of Bitcoin without proper identity verification. This created an environment where criminals could exploit the platform for fraud, money laundering, prostitution rings, and transactions tied to the defunct Backpage marketplace. By enabling high-risk exchanges and ignoring red flags, Paxful reportedly earned millions while exposing the financial system to unlawful activity.
Reduced Penalty Reflects Cooperation With Investigators
Despite the extensive violations, the Department of Justice agreed to a significantly reduced penalty. Officials explained that Paxful demonstrated substantial cooperation during the investigation and implemented remedial measures to improve compliance. These actions influenced the DOJ’s decision to lower the potential $112.5 million criminal fine to $4 million. The company is now preparing for its official sentencing in early 2026.
