Paxos Pledges $48.5M to NYDFS Over Binance Compliance Lapses

Paxos Trust Company, a New York-based stablecoin issuer, has agreed to a $48.5 million settlement with the New York Department of Financial Services (NYDFS) over compliance failures related to its partnership with Binance between 2019 and 2023. The settlement, announced on August 7, 2025, includes a $26.5 million civil penalty and a $22 million commitment to improve compliance infrastructure. This resolution follows a multi-year investigation that uncovered deficiencies in anti-money laundering (AML) and know-your-customer (KYC) controls, which allowed illicit transactions to go undetected [1].

The NYDFS investigation identified approximately $1.6 billion in suspicious activity through the BUSD channel, a stablecoin issued by Paxos and pegged to the U.S. dollar. Regulators criticized the company for its “deficient” transaction monitoring systems and an “unsophisticated” KYC framework. Additionally, the regulator noted that internal red flags were not appropriately escalated, underscoring the need for stronger oversight of third-party risk management in the crypto industry [1].

NYDFS Superintendent Adrienne Harris emphasized the importance of robust risk management frameworks for regulated entities, particularly when engaging with external partners. Her remarks reflect the broader regulatory focus on ensuring compliance in the digital asset space, with AML and KYC protocols now central to regulatory expectations [1].

Paxos has characterized the compliance issues as historical and stated that they were fully resolved over two and a half years ago. The company confirmed that no customer accounts were affected and that there was no consumer harm from the alleged deficiencies. A Paxos spokesperson added that the settlement marks the final resolution of the matter and that the firm has not encountered similar issues in its other stablecoin operations [1].

The regulatory scrutiny of Paxos began over two years ago, with NYDFS ordering the firm to cease BUSD issuance in February 2023. At the same time, the U.S. Securities and Exchange Commission (SEC) issued a Wells notice to Paxos, though it closed its case in 2024 [1].

This settlement underscores the growing regulatory expectations for stablecoin issuers, particularly those operating in New York. As compliance standards continue to evolve, crypto firms are increasingly required to demonstrate strong due diligence and operational safeguards to prevent financial crime and protect the integrity of digital asset ecosystems [1].

Source:

[1] Paxos Fined $48.5M by NYDFS for Compliance Failures in Binance Partnership (https://blockonomi.com/paxos-fined-48-5m-by-nydfs-for-compliance-failures-in-binance-partnership/)

[2] Paxos Pledges $48.5 Million to NYDFS in AML Settlement (https://www.ainvest.com/news/paxos-pledges-48-5-million-nydfs-aml-settlement-binance-ties-2508/)

[3] New York Fines Paxos $48.5M Over Binance-Linked Compliance Lapses (https://cryptoslate.com/new-york-fines-paxos-48-5m-over-binance-linked-compliance-lapses/)

[4] NYDFS Fines Paxos $48.5M Over BUSD and Binance Links (https://www.bitdegree.org/crypto/news/nydfs-slaps-paxos-with-48-5-million-deal-over-busd-and-binance-links)

[5] Paxos Pays $48.5m to Settle NY Charges Over Binance USD (https://crypto.news/paxos-pays-48-5m-to-settle-ny-charges-over-binance-usd/)