Paxos Payouts $48.5 Million in Binance Due Diligence Settlement

Paxos Trust Company has agreed to pay $48.5 million to settle charges brought by the New York Department of Financial Services (NYDFS) over compliance failures linked to its partnership with Binance in the issuance of Binance USD (BUSD), a once-dominant stablecoin [1]. The settlement, finalized on 7 August 2025, resolves a prolonged legal dispute centered on Paxos’s failure to conduct adequate due diligence and implement sufficient anti-money laundering safeguards [1]. Although the case did not allege fraud, it emphasized the company’s shortcomings in monitoring Binance’s activities in accordance with New York regulatory standards [1].

The Paxos-Binance collaboration began in 2020, with BUSD marketed as a regulated stablecoin fully backed by the U.S. dollar [1]. At its peak, the token achieved a circulation of over $23 billion, ranking as the third-largest stablecoin globally, behind Tether and USD Coin [1]. However, as scrutiny of stablecoins intensified in late 2022, the NYDFS raised concerns about Paxos’s compliance practices, particularly its inability to ensure Binance’s adherence to legal requirements [1]. These concerns were compounded by a lack of ongoing monitoring during the partnership [1].

Regulatory pressure mounted as both the NYDFS and the U.S. Securities and Exchange Commission (SEC) launched investigations into BUSD in late 2022 [1]. The SEC focused on whether the token could be classified as an unregistered security, while the NYDFS concentrated on due diligence and anti-money laundering violations [1]. In February 2023, the NYDFS ordered Paxos to cease issuing new BUSD tokens [1]. The company complied, supporting redemptions until the supply gradually declined, while Binance also reduced its support for the token [1].

The settlement in 2025 comes amid a broader shift in the U.S. crypto regulatory landscape. Following the 2024 presidential election, the Trump administration appointed Paul Atkins, a crypto-friendly figure, as SEC Chairman [1]. This shift led the SEC to officially close its investigation into Paxos in July 2024 [1]. Despite this, the NYDFS continued its enforcement actions, ultimately resulting in the $48.5 million settlement [1]. The payment includes a $26.5 million penalty and a $22 million investment in improved compliance systems [1].

Paxos remains an active stablecoin issuer, currently managing tokens such as PayPal USD (PYUSD), and continues to operate under New York’s regulatory framework [1]. The resolution of the BUSD case highlights the increasing importance of due diligence and compliance in crypto partnerships, particularly when dealing with international exchanges [1]. It also reflects the evolving regulatory approach under the new administration, which appears more accommodating to the crypto industry while still enforcing accountability for past missteps [1].

Source: [1] Paxos to pay $48.5 million in BUSD case settlement ... (https://invezz.com/news/2025/08/07/paxos-to-pay-48-5-million-in-busd-case-settlement-binance-due-diligence-flagged/)