Paxful Inc. Co-Founder Pleads Guilty to Conspiracy to Fail to Maintain Effective Anti-Money Laundering Program
The co-founder and former chief technology officer (CTO) of Paxful Inc. pleaded guilty today 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 Nov. 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.
Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Phillip A. Talbert for the Eastern District of California; Special Agent in Charge Tatum King of Homeland Security Investigations (HSI) San Francisco; and Acting Special Agent in Charge Michael Mosley of the IRS Criminal Investigation (IRS-CI) Oakland Field Office made the announcement.
HSI and IRS-CI are investigating the case.
Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley and Trial Attorneys Emily Cohen, Victor Salgado, and Caylee Campbell of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and Assistant U.S. Attorney Matthew Thuesen for the Eastern District of California are prosecuting the case.
MLARS’ Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) investigation. OCDETF identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.
Link to original press release
The co-founder and former chief technology officer (CTO) of Paxful Inc. pleaded guilty today 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 Nov. 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.
Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; U.S. Attorney Phillip A. Talbert for the Eastern District of California; Special Agent in Charge Tatum King of Homeland Security Investigations (HSI) San Francisco; and Acting Special Agent in Charge Michael Mosley of the IRS Criminal Investigation (IRS-CI) Oakland Field Office made the announcement.
HSI and IRS-CI are investigating the case.
Bank Integrity Unit Deputy Chief and National Cryptocurrency Enforcement Team Deputy Director Kevin Mosley and Trial Attorneys Emily Cohen, Victor Salgado, and Caylee Campbell of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and Assistant U.S. Attorney Matthew Thuesen for the Eastern District of California are prosecuting the case.
MLARS’ Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.
This prosecution is part of an Organized Crime Drug Enforcement Task Forces (OCDETF) investigation. OCDETF identifies, disrupts, and dismantles the highest-level drug traffickers, money launderers, gangs, and transnational criminal organizations that threaten the United States by using a prosecutor-led, intelligence-driven, multi-agency approach that leverages the strengths of federal, state, and local law enforcement agencies against criminal networks.
Link to original press release
