Paxos Trust Company has agreed to pay a total of $26.5 million in fines to the New York State Department of Financial Services (NYDFS) due to failures in due diligence related to its partnership with Binance on the BUSD stablecoin.

A review of transactions from 2017 to 2022 revealed over $1.6 billion in transactions linked to illicit actors or entities sanctioned by the U.S. Office of Foreign Assets Control (OFAC).

As part of the settlement announced on August 7, 2025, Paxos will not only pay the $26.5 million penalty but will also invest an additional $22 million to enhance its compliance program.

The NYDFS found systemic issues within Paxos' compliance program, including ineffective KYC protocols and outdated transaction monitoring systems that failed to detect money laundering patterns.

The investigation revealed that Paxos lacked adequate monitoring controls for illicit activities associated with Binance and failed to escalate identified issues to senior management.

Shortcomings in Paxos' anti-money laundering practices were identified during its partnership with Binance, which began in 2018 with the launch of Binance USD (BUSD).

In February 2023, the U.S. Securities and Exchange Commission (SEC) issued a Wells Notice to Paxos regarding potential legal action over unregistered securities related to BUSD, although this notice was later withdrawn in 2024.

The NYDFS previously ordered Paxos to stop minting BUSD in February 2023 due to concerns about its relationship with Binance, leading to the eventual phase-out of BUSD.

The fine and compliance failures are part of the resolution of the NYDFS investigation, with Paxos stating that there are no ongoing claims regarding its relationship with Binance or the issuance of BUSD.

This case highlights increasing scrutiny over anti-money laundering (AML) and Know Your Customer (KYC) regulations within the cryptocurrency sector, as companies seek clearer regulatory guidelines.

Paxos cooperated with the NYDFS throughout the investigation, asserting that the compliance issues were historical and had been fully addressed over two and a half years ago, with no impact on consumer accounts.

NYDFS Superintendent Adrienne Harris emphasized the necessity of robust risk management frameworks for regulated entities to safeguard consumers and maintain the integrity of the financial system.