Paxful's co-founder and ex-CTO, Artur Schaback, has pleaded guilty to conspiring to deliberately fail in establishing a compliant Anti-Money Laundering (AML) program as mandated by the Bank Secrecy Act. The US Department of Justice (DOJ) disclosed that Schaback did not gather necessary Know Your Customer (KYC) data for customers who opened accounts on Paxful between July 2015 and June 2019.

Schaback is accused of promoting Paxful as a platform that didn't require KYC, misrepresenting AML policies to third parties, and failing to report any suspicious activities. The DOJ asserts that Schaback's neglect allowed Paxful to become a conduit for money laundering, sanctions violations, and other criminal activities.

Schaback's sentencing is set for November 4th, with a maximum penalty of five years in prison. The final decision will be made by a federal district court judge, considering the US Sentencing Guidelines and other statutory factors. Schaback will also resign from Paxful Inc.'s Board of Directors.