Paxful co-founder to face five-year prison sentence after pleading guilty to AML debacle

Artur Schaback, co-founder and former CTO of cryptocurrency exchange Paxful, may be sentenced to five years in prison for violating anti-money laundering regulations.

On Monday, July 8, Schaback pleaded guilty to failing to implement an effective AML program at Paxful and allowing customers to make transactions without providing sufficient KYC information.

According to the U.S. Department of Justice, The verdict in Schaback’s case is scheduled for November 4.Before that, he will resign from his seat on the stock exchange’s board.

Schaback helped Paxful AML breach

July 8 press release The U.S. Department of Justice (DOJ) Office of Public Affairs has revealed that Paxful’s Chief Technology Officer, Artur Schaback, has pleaded guilty to violating AML regulations.

According to the report, court documents from July 2015 to June 2019 show that Schaback, at age 36, ran an online P2P virtual currency platform, Paxful. The platform allows customers to negotiate and trade digital currency for several items, including gift cards, prepaid cards and fiat currency.

However, Schaback allowed users to open accounts and conduct these transactions without providing sufficient know-your-customer information. He also promoted Paxful as a platform where KYC is not required, presenting false AML policies that were never implemented.

Furthermore, Schaback did not report any suspicious activity even though he knew Paxful customers were engaging in questionable and criminal activity.

By failing to implement rigorous AML and KYC programs, Schaback made Paxful a ripe medium for sanctions violations, money laundering, and other criminal activities. This includes romance scams, fraud, extortion schemes, and prostitution.

The Paxful co-founder pleaded guilty to conspiracy and willful failure to establish, implement, and effectively maintain a Bank Secrecy Act-based AML program. He faces a maximum sentence of five years in prison for his crimes.

In addition, a federal judge will consider U.S. sentencing guidelines and other factors to determine an appropriate sentence for Schaback.

In addition, Schaback signed a guilty plea agreement with U.S. prosecutors on Monday. The guilty plea agreement filed in U.S. District Court in California shows Schaback will pay a $5 million fine in three installments.

He was expected to pay first installment of $1 million on the day of his guilty plea. He will pay another $3 million at sentencing on Nov. 4, and the remaining $1 million over two years.

More events related to Paxful and its closure

March sawing detailing Schaback’s allegations, he said he conspired with someone identified as Paxful’s president and CEO to violate AML rules. According to the information, Schaback and his associate exempted some customers from KYC and AML rules based on their trading volumes and relationships.

In March 2023, Schaback sued Mohamad Youssef, one of the co-founders and former CEO of Paxful. a lawsuit arises from disputes over stock exchange control, misuse of funds, evasion of sanctions, money laundering, etc.

In April 2022, Youssef said in blog post that Paxful agreed to a court order to appoint Srinivanus Rajuas of Richards Law Firm as its trustee. In May 2023, Paxful appointed Roshan Dharia as interim CEO.

After much struggle, Paxful has ceased operations in April 2023. In a statement on April 4, blogThe company’s CEO, Ray (Mohamad) Youssef, cited key employee departures and regulatory disputes as the reason. factors behind the closure.

Reservation: The opinions expressed in this article do not constitute financial advice. We encourage readers to conduct their own research and determine their own risk tolerance before making any financial decisions. Cryptocurrency is a highly volatile, high-risk asset class.

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