- The $48.5 million resolution uncovers serious AML weaknesses and due diligence failures linked to its Binance collaboration.
- Growing concerns over assets like BUSD have led regulators worldwide to strengthen enforcement and tighten compliance standards.
- New York’s financial regulator remains at the forefront of enforcing high standards in virtual asset oversight.
New York-Paxos Trust Company will pay a $48.5 million settlement with the New York Department of Financial Services (DFS) since it conducted a thorough inquiry into the company’s anti-money laundering (AML) program and due diligence failure regarding an association with Binance. The penalty amounts to 26.5 million dollars as part of the settlement, and it will provide an additional 22 million dollars to beef up its compliance systems further.
Regulators Uncover Major Compliance Gaps
According to DFS officials’ findings, Paxos did not have effective monitoring mechanisms in place to detect suspicious transactions and evaluate its business relationship with Binance. More than 1.6 billion dollars worth of transactions involving illicit activity passed through the platform, with Paxos and Binance collaborating to release a coin on the Binance USD (BUSD) stablecoin platform.
NEW: DFS has secured a $48.5 Million settlement with Paxos Trust Company for anti-money laundering deficiencies and diligence failures.
DFS remains committed to ensuring a fair and equitable financial system for all New Yorkers.
See the full release: https://t.co/q8QuqRfP4i pic.twitter.com/P2wj6n17Yo
— NYDFS (@NYDFS) August 7, 2025
These operations have put at risk users and the financial system at large and in particular, Binance enabled U.S. customers to potentially gain access to its unregulated exchange, via flimsy geofencing measures. DFS determined that Paxos did not manage to detect or report these concerns to the senior leadership, though they should have done so because of the regulatory mandate.
DFS was the first to respond to the risks connected with BUSD in the world to regulate them. The start of the phased wind-down of the stablecoin came in February 2023 when the agency ordered Paxos to cease the minting of new BUSD tokens.
AML Failures Lead to Financial Penalty
DFS found that the anti-money laundering structure of Paxos to be inadequate and weak. The Know Your Customer (KYC) procedures in the company made it possible for multiple accounts, with related addresses and corporate documents to escape notice.
Besides, Paxos did not have a consistent procedure of examining law enforcement requests and failed to notice several red flags. These compliance failures, according to the regulators, made it easier to misuse the system by illicit actors who could not be detected.
In the settlement, Paxos would pay the fine of $26.5 million and a further investment of $22 million in its internal compliance system. This entails a better transaction surveillance, and KYC systems all of which are to be approved by DFS.
Shifting Regulatory Climate Supports Compliance Push
The decision was made because the regulation of crypto in the United States has changed significantly. Recently, the Securities and Exchange Commission (SEC) terminated its investigation into BUSD, and as such, Paxos can put its foot on the gas in terms of compliance and growth.
The regulatory environment started changing in early 2024 as a result of changes in leadership at important agencies. During the tenure of SEC head Paul Atkins, the SEC has taken a more crypto-friendly stance, indicating less vigorous enforcement.
Despite the situation becoming less challenging for some companies, DFS has also strengthened its message concerning the accountability of licensed firms. Superintendent Adrienne A. Harris stated that a regulated financial firm should practice high levels of compliance, particularly when transacting business with high-risk partners.
