As a long-term crypto investor with experience in the industry, I find the recent news about Artur Schaback’s guilty plea and his role as co-founder of Paxful deeply concerning. The allegations that he bypassed KYC verification for years, marketed the platform as one that doesn’t require KYC, and presented fake AML policies are alarming.
According to the most recent announcement from the United States Department of Justice on July 8, Artur Schaback, a co-founder of Paxful, admitted guilt for his involvement in a conspiracy and neglecting to uphold the company’s anti-money laundering (AML) protocol. Consequently, Schaback was compelled to step down from Paxful’s board of directors and is anticipated to receive sentencing in November this year.
Paxful Co-founder Bypassed KYC Verification
According to the Department of Justice’s newest announcement, Artur Schaback managed Paxful, a cryptocurrency trading platform, from July 2015 through June 2019. During this period, he permitted clients to create accounts without collecting adequate Know Your Customer (KYC) data.
The authorities additionally charged Schaback with advertising Paxul as a no-KYC platform and deceitfully sharing fabricated AML policies to external entities without any genuine enforcement at Paxful. Moreover, Paxful failed to report any questionable transactions in spite of clear indications of misconduct among its users. In their submission to the court, the Department of Justice noted:
“Schaback enabled the use of Paxful for illicit activities such as money laundering, breaching sanctions, and various forms of criminal behavior, which included fraudulent schemes, romance scams, blackmail plots, and prostitution rings.”
As a researcher, I’ve come across an intriguing detail from the recent filing. It appears that a confederate of Paxful and Schaback created exceptions to the Anti-Money Laundering (AML) and Know Your Customer (KYC) policies based on the trading volumes and personal connections of certain Paxful customers.
Artur Schaback Faces Five Years of Jail Term
Schaback admitted in court to intentionally neglecting to set up and execute proper Anti-Money Laundering (AML) systems as mandated by the Bank Secrecy Act. His sentencing hearing is scheduled for November 4 later this year, with a possible penalty of five years’ imprisonment.
On Monday, it was disclosed in a California District Court that the government was seeking a penalty of $5 million from Schaback as part of a plea deal. The fine would be paid in three installments: $1 million upon his admission of guilt, another $3 million at the time of sentencing, and the last $1 million within two years following the sentencing.
In March 2023, I found myself embroiled in a legal dispute with my co-founder and former CEO of Paxful, Mohamad (Ray) Youssef. The crux of the issue revolved around control of the exchange and allegations of misappropriated company funds.
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2024-07-09 11:58