Key Takeaways:
- Paxos reached a $48.5M settlement with NYDFS over past AML compliance failures tied to its Binance partnership.
- NYDFS alleged $1.6B in illicit funds moved via Binance USD, leading to a February 2023 halt in BUSD issuance.
- Paxos says compliance issues were identified over two years ago and have since been remediated.
The New York Department of Financial Services (NYDFS) has reached a $48.5 million settlement with Paxos over alleged anti-money laundering (AML) compliance failures tied to its past partnership with Binance.
Paxos will pay $26.5 million to the state and invest $22 million into strengthening its compliance program.
NEW: DFS has secured a $48.5 Million settlement with Paxos Trust Company for anti-money laundering deficiencies and diligence failures.
— NYDFS (@NYDFS) August 7, 2025
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 accused Paxos of failing to conduct adequate due diligence on Binance, allowing about $1.6 billion in illicit funds to flow through the Binance USD (BUSD) stablecoin.
In February 2023, the regulator ordered Paxos to stop issuing BUSD, citing insufficient Know Your Customer (KYC) measures and clarifying it had not approved the issuance of “Binance-Peg BUSD” on any blockchain.
This action followed a 2023 SEC Wells Notice alleging BUSD was an unregistered security, which was withdrawn in 2024.
NYDFS stressed that licensed entities must maintain risk frameworks matching their business risks, including third-party relationships.
Paxos said the compliance issues were historical, identified over two and a half years ago, and have since been fully remediated, with no new claims related to Binance or BUSD.
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