In a recent turn of events, Artur Schaback, co-founder and former chief technology officer of the online virtual currency platform Paxful Inc., has entered a guilty plea for his role in a conspiracy to fail to maintain an anti-money laundering (AML) program up to federal standards. Court documents reveal that from July 2015 to June 2019, Schaback, 36, from Tallinn, Estonia, allowed patrons of Paxful to engage in currency trades without gathering sufficient know-your-customer (KYC) information, thereby breaching required AML protocols.
Despite being fully aware of the dubious dealings transpiring on Paxful, Schaback chose not to file a single suspicious activity report, which could possibly have flagged the array of criminal activities, ranging from money laundering to romance scams. He actively marketed the platform as a space that did not enforce KYC procedures, according to the statement from the U.S. Attorney's Office for the Eastern District of California.
The consequences of Schaback's actions extend beyond regulatory oversight failures, painting Paxful as a conduit for sinister activities, including fraud and other illicit dealings. His guilty plea to the charge of conspiracy to willfully fail to establish an AML program came ahead of a scheduled sentencing on November 4. U.S. District Judge Kimberly J. Mueller will decide his fate, which could result in a maximum of five years in prison, though the ultimate sentence will reflect consideration of statutory factors and Federal Sentencing Guidelines.
The case against Schaback was put together following investigations led by Homeland Security Investigations and the IRS Criminal Investigation. The principal deputy assistant attorney general, Nicole M. Argentieri, highlighted the efforts of the Bank Integrity Unit and National Cryptocurrency Enforcement Team, which aim to systematically to dismantle the financial mechanisms of criminal networks. Schaback has also agreed to resign from Paxful Inc.’s Board of Directors in the wake of his guilty plea.
