The Co-Founder of Paxful Inc. has pleaded guilty to negligence surrounding conspiracy to willfully fail to maintain an effective anti-money laundering (AML) program.
Court documents relating to the Justice Department case allege that Artur Schaback purposefully neglected the operational governance of the Paxful platform.
Paxful Co-Founder pleads guilty
The platform was intended to be used as a place for online transactions and online currency trading.
However, this would become a hotbed of illegal activity without robust processes to keep shady forces at bay. The court documents point the finger at Schaback, who let the platform sink into a state where it could be manipulated by criminals.
These illicit parties used the site to commit money laundering, as well as fraud, romance scams, extortion schemes, and prostitution.
Schaback was accused of purposefully neglecting two key practices to root out criminal activity. These are the know-your-customer (KYC), which allows an operator of a platform like Paxful to check the legitimacy of someone signing up and alerting any red flags.
The other process is the anti-money laundering (AML) program, which detects transactions that may seem improper or flare up certain safeguards.
According to the Justice Department statement, “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.”
The Co-Founder has pleaded guilty to “willfully fail to establish, develop, implement, and maintain an effective AML program as required by the Bank Secrecy Act.” This could net Schaback up to five years in prison.
He is scheduled to be sentenced later this year (November 4) by a federal district court judge, who will consider the U.S. Sentencing Guidelines and other statutory factors. He has also resigned from the Board of Directors at Paxful.
Image: Ideogram.
