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Author: Jesse Coghlan, CoinTelegraph; Compiled by: Deng Tong, Bitchain Vision
Artur Schaback, co-founder and former technology director, admitted Monday that he failed to maintain an effective anti-money laundering (AML) program on cryptocurrency exchanges, facing up to five years in prison.
The U.S. Department of Justice said July 8 that Schaback, the exchange’s former chief technology officer, is scheduled to be sentenced on Nov. 4 and will resign from the Paxful board.
The plea agreement filed in California District Court on the same day shows thatGovernment prosecutors agreed to impose a $5 million fine, which Schaback will repay in three installments – $1 million on the date of guilty plea, $3 million on the time of sentence, and the last $1 million will be paid over the next two years.
A information document detailing its allegations in late March said Schaback and an accomplice — known only as Paxful’s “president and CEO” —Failure to establish an effective anti-money laundering program within 90 days of business launch as required by the Bank Secrecy Act.
Prosecutor’s documents say he has not yet developed a “Know Your Customer” (KYC) plan to verify people before using the exchange, which requires at least a name, date of birth, address and “other identity information”.
“Schaback makes Paxful a tool for money laundering, sanctions violations and other criminal activities, including fraud, love scams, blackmail and prostitution, due to the failure to implement anti-money laundering and KYC programs,” the Justice Department said in a statement.
The document also states that between July 2015 and June 2019, Schaback and “complices” allowed users to open Paxful accounts and conduct transactions without providing “enough identity information or documents” to verify their identity.
Paxful also advertises to customers that it is “a platform that does not require KYC and/or allows purchases without ID cards,” the documents said.
Undercover law enforcement said they trade through a Paxful account without KYC.Source: CourtListener
The document states that when third parties requested the development of anti-money laundering policies, Schaback and “complices” proposed a policy of “plagiarism from other agencies” that they knew was not “implemented or implemented.”
The company also added that the two also “exceptions were made to AML and KYC policies based on transaction volumes of Paxful customers and their relationship with Schaback or “complices”.”
Schaback sued Mohamad (Ray) Youssef, his co-founder and former Paxful CEO, in March 2023, which put them in dispute over control of the exchange, accusing them of misappropriating company funds, laundering money and evading sanctions, among others.
In an April 2022 blog post, Youssef said Paxful agreed to a court order to appoint Srinivas Raju, director of the law firm Richards, Layton and Finger, as the custodian of the exchange.
In late May 2023, Paxful said it had appointed Roshan Dharia to take over as interim CEO.
