NYDFS Fines Paxos For Earlier Binance Stablecoin Product

Paxos Trust Company has been ordered to pay a $48.5 million settlement by the New York State Department of Financial Services (NYDFS) due to significant compliance failures related to its partnership with Binance, according to CoinCentral. The settlement includes a $26.5 million fine and mandates Paxos to invest an additional $22 million to enhance its internal compliance systems.

An NYDFS investigation found that Paxos failed to conduct adequate due diligence on Binance, its former partner, and did not have sufficient controls in place to monitor suspicious activities. It was revealed that systemic deficiencies in Paxos's AML and KYC programs allowed approximately $1.6 billion in illicit transactions to flow through the Binance USD (BUSD) stablecoin.

Several other concerns considered, as hinted by NYDFS Superintendent Adrienne A. Harris, including a slower response time and poor escalation of the findings from the internal team. Additionally, there were criticisms on the underlying monitoring systems being used to ensure the core compliance of the accounts.

Paxos has stated that the compliance issues identified have since been remediated, asserting that there was no impact on customer funds. The company ceased minting BUSD in early 2023 following regulatory pressure, and it has since wound down the stablecoin without losing its dollar peg.

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Source(s): https://coincentral.com/paxos-hit-with-48-5-million-penalty-over-binance-stablecoin-scandal/