Paxful’s co-founder and former CTO, Artur Schaback, recently pleaded guilty to conspiracy for deliberately failing to establish, develop, implement, and maintain a compliant AML program as required by the Bank Secrecy Act. This act of negligence led to severe consequences for both Schaback and Paxful as a whole.
One of the major accusations against Schaback was his failure to collect necessary KYC information from customers who opened accounts to trade on Paxful between July 2015 and June 2019. By marketing Paxful as a platform that did not require KYC, Schaback misled both customers and third parties, ultimately leading to a lack of enforcement of AML policies.
Consequences of Misrepresentation
The consequences of Schaback’s actions were severe, as they allowed Paxful to become a “vehicle” for money laundering, sanctions violations, and various criminal activities such as fraud, romance scams, extortion schemes, and prostitution. By neglecting to implement proper AML and KYC programs, Schaback enabled illegal activities to thrive on the platform.
Sentencing and Penalty
Schaback’s sentencing is scheduled for November 4th, with a potential maximum penalty of five years in prison. The decision will be made by a federal district court judge, who will take into account the US Sentencing Guidelines and other statutory elements. In addition to facing potential imprisonment, Schaback will also step down from Paxful Inc.’s Board of Directors.
The case of Artur Schaback serves as a cautionary tale for other executives and companies in the fintech industry. Compliance with AML and KYC regulations is not optional but mandatory to prevent illegal activities and maintain the integrity of the platform. The consequences of negligence in this regard can be severe, both personally and professionally.
