On February 11, 2026, Paxful Holdings Inc. was sentenced to pay a $4 million fine after DOJ prosecutors accused the Bitcoin trading platform of profiting from illicit funds tied to fraud, prostitution, and sex trafficking, per The Block. Originally facing over $112 million, the penalty was reduced due to Paxful’s inability to pay, per the DOJ statement. Between 2015 and 2022, Paxful facilitated $17 million in Bitcoin transfers to Backpage and similar sites, earning at least $2.7 million in profits, with founders reportedly calling this growth the “Backpage Effect.
Backpage, a site notorious for prostitution ads including minors, drove significant Paxful activity, per the DOJ. Co-founder Artur Schaback pleaded guilty in 2025 to failing to maintain an effective AML program and misleading users about KYC requirements, per. Paxful suspended operations in 2019, but the case highlights systemic AML deficiencies in early P2P crypto platforms, per CoinDesk. X posts from @CryptoLawyerz note Paxful’s lax controls attracted criminal funds, contrasting with regulated exchanges like Coinbase.
The fine underscores DOJ’s crackdown on crypto platforms enabling crime, aligning with SEC and FinCEN efforts under the GENIUS Act, per. While Bitcoin ($113,234) remains unaffected, per CoinMarketCap, cases like Paxful fuel calls for stricter AML/KYC rules, per. Compared to Binance’s $4.3B settlement, Paxful’s reduced penalty reflects financial constraints, per. Investors should prioritize regulated platforms with robust AML protocols, per Coinlaw.io. Monitor BTC support at $112,000 and diversify into USDC.
Paxful’s case may deter unregulated P2P platforms, boosting trust in compliant ones, per. With China exploring yuan stablecoins and U.S. Bitcoin Reserve talks, 2026 could see balanced regulation, per. Follow @TheBlock__ on X for updates. DOJ’s action reinforces crypto’s maturation, but risks remain for non-compliant entities.
