09.08.2025 04:53
New York's Department of Financial Services levied a substantial $48.5 million fine against Paxos Trust Company, a major cryptocurrency infrastructure firm, resolving allegations of significant anti-money laundering (AML) failures stemming from its collaboration with Binance. This settlement, announced on Thursday, represents one of the largest enforcement actions ever taken against a stablecoin issuer.
The penalty, a significant sum, is structured as a two-pronged approach. A direct payment of $26.5 million will be made to New York State, while a further $22 million will be invested by Paxos over the next three years to drastically overhaul and enhance its compliance infrastructure. This investment signifies a commitment to rectifying the identified deficiencies.
Investigators determined that Paxos demonstrably failed in its duty to adequately monitor Binance for illicit activities. Specifically, approximately $1.6 billion in questionable transactions, linked to criminal enterprises and sanctioned entities, traversed Binance's platform between 2017 and 2022, according to the settlement terms. This substantial volume highlights the severity of the AML shortcomings. Paxos's partnership with Binance, initiated in 2018 to manage the Binance USD (BUSD) stablecoin, placed the company under a regulatory obligation to rigorously scrutinize Binance's operational integrity, an obligation the investigation revealed was not met.
The investigation uncovered several crucial flaws within Paxos's compliance program. Lax geographic restrictions on Binance's platform allowed U.S. customers access, a violation of regulations that Paxos failed to address effectively despite assurances from Binance. Furthermore, Paxos's inadequate customer screening system allowed criminals to easily create multiple accounts using identical identifying information, bypassing crucial security measures. Similarly, their transaction monitoring systems failed to detect clear patterns indicative of money laundering activities, highlighting systemic weaknesses.
Following concerns raised by New York regulators in February 2023, Paxos was ordered to halt the minting of new BUSD tokens. This decisive action by New York marked a global precedent, making it the first regulatory body to take such action against Binance. The settlement underscores the critical importance of robust AML compliance within the cryptocurrency industry and serves as a stark warning to other companies operating in this rapidly evolving landscape.
