Paxful

Paxful CEO announces 88% of accounts unfrozen, $4.4M in funds remaining

“I gave up my title as CEO to unfreeze these accounts and am also in danger of being in contempt of court,” said Ray Youssef.

The CEO of peer-to-peer crypto marketplace Paxful has announced the unfreezing of 88% of previously frozen user accounts more than a week after suspending operations.

In an April 16 Twitter thread, Paxful CEO Ray Youssef said roughly $4.4 million in frozen funds remained on the platform after staff had unfrozen 88% of existing accounts. According to Youssef, the unfreezing of accounts had been accomplished “with no engineers or compliance folks,” claiming all remaining frozen funds were “in the hands of” United States financial regulators.

Youssef said though roughly 3% of total user funds were still frozen, he had made the unfreezing his “final act” as Paxful’s CEO:

“I gave up my title as CEO to unfreeze these accounts and am also in danger of being in contempt of court,” wrote Youssef. “That is what I did besides alot of sleepless nights. Nothing more I can do but sleep well tonight. Integrity trumps risk.”

Related: Paxful shutdown hits Nigeria harder than the rest of the world — Here’s why

The “contempt of court” claim was likely related to ongoing litigation between Youssef and Paxful co-founder Artur Schaback, who helped launch the platform in 2015. Schaback claimed in court the company had been involved in the misappropriation of funds, money laundering and evasion of U.S. sanctions. Youssef told Cointelegraph at the time the allegations were “ridiculous.”

The announcement followed the suspension of operations for Paxful users on April 4. At the time, Youssef said there had been some “key staff departures,” citing “regulatory challenges” the platform was facing. The CEO had already authorized refunds for Earn program users affected by the collapse of Celsius months prior.

Magazine: Journeys in Blockchain: Ray Youssef of Paxful

Paxful co-founders’ litigation cites misappropriation of funds, money laundering, U.S. sanctions evasion

A bitter dispute between Paxful’s co-founders in Delaware courts may have led to the crypto marketplace’s sudden closure.

A bitter dispute between Paxful’s co-founders, Artur Schaback and Mohamad (Ray) Youssef, in Delaware’s courts may have been the real reason behind the Bitcoin marketplace’s sudden closure on April 4. 

Schaback and Youssef, who started Paxful in 2015 with a shared passion for Bitcoin (BTC), are now litigating the company’s control, with several accusations against each other, according to court documents. The allegations include misappropriation of company funds, money laundering and evasion of United States sanctions against Russia, among others.

Founders disagree

Schaback was the chief operating officer of Paxful until February 2022, when he was allegedly blocked from participating in the company’s operations over disagreements with Youssef — Paxful’s CEO — about the marketplace’s future and operations, including conflicts about “the legitimacy of ever-increasing expenditures to undisclosed entities.”

Court documents filed in Delaware on March 21, 2023. Source: U.S. Court of Chancery of Delaware.

According to Schaback’s claims in the lawsuit, a large quantity of Paxful’s Bitcoin has been transferred to a Turkish entity called “EMiR,” which he claims is not a legitimate software company. “It does not have a website publicizing software or web development services and its physical address […] appears to belong to a clothing company.”

Dekslektika, a St. Petersburg, Russia-based company owned by former Paxful directors, is a subcontractor allegedly receiving payments from EMiR. As per the court filings, those entities were accused of being behind “massive non-ordinary-course transactions” that began after Schaback was frozen out of the company’s operations. “There is no legitimate business purpose for these transfers,” says the lawsuit.

In comments to Cointelegraph, Youssef classified the claims as “ridiculous.” According to him, the accusations center around salary payments to a Turkish engineering company working for Paxful. “He [Schaback] blocked these salary payments to our engineers with these accusations, claiming they were fake and even that they were performing no such services. He played an insane game of chicken until the entire team of 80 engineers stopped working. […] Mr. Schaback himself was forced to admit that this was a critical mistake and authorized these engineers to be given their back pay at a board meeting,” noted Youssef.

Court documents filed on March 3, 2023. Source: U.S. Court of Chancery of Delaware.

Youssef’s point of view

Youssef claimed his co-founder’s legal tactics “bordered on terrorism” and cost Paxful many employees and directors. “His accusations were so slanderous that we lost our GC, CTO, CISO, VP of finance and VP of HR. He even went after our law firm, McDermott Will and Emery, one of the most respected law firms in the United States, demanding they be removed from representing us in Delaware,” he told Cointelegraph.

Under the imminent resignation of his team, Youssef said it was impossible to keep Schaback at Paxful.

“Artur and I were homeless for a time in NYC while we built Paxful. He came from a working-class family like me, and we bonded over many things. He worked hard in the beginning and added value. I respected that he took care of his family. Sometime around 2018, he began to change. I covered for him, but when the entire ELT threatened to resign, I had to accept the ugly truth that he had changed and was not who I thought he was.”

Schaback’s point of view

In an interview with Cointelegraph, Schaback said Youssef took unilateral action to shut down Paxful on April 4. “Mr. Youssef’s actions were meant to consolidate power in a jurisdiction outside that of the United States and to remove me and other shareholders from his plans.”

Schaback said he has limited access to information in the company and hasn’t been involved in day-to-day operations for 18 months.

“Mr. Youssef and I had fundamental differences in Paxful’s product direction and corporate governance, and you can see by his current actions that his goal all along was to remove Paxful from U.S. jurisdiction due to regulatory pressure.”

Magazine: Bitcoin in Senegal: Why is this African country using BTC?

Paxful shutdown hits Nigeria harder than the rest of the world — Here’s why

Paxful’s shutdown has left its global community heartbroken, but it has significantly impacted the Nigerian community, where it pioneered P2P crypto use.

The shutdown of the peer-to-peer (P2P) cryptocurrency marketplace Paxful has left its worldwide community searching for alternatives, but it appears to have significantly affected the Nigerian crypto community. 

On April 4th, Paxful declared that it would halt its operations. The reason for this decision, according to the founder and CEO Ray Youssef’s blog, was due to “key staff departures” and the regulatory environment.

According to “The 2020 Geography of Cryptocurrency Report” by Chainalysis, Nigeria ranked eighth in crypto adoption and usage among 154 countries included in the study. Acceptance and usage of crypto in Nigeria were not as high until Paxful pioneered the use of peer-to-peer technology in the country, helping expand the crypto industry.

A Nigerian crypto user, Emmanuel Susegh, told Cointelegraph that the shutdown of Paxful feels like “the death of a loved one,” as the exchange helped him make his first $100,000. Susegh went on to say that Paxful was the go-to platform he used to trade gift cards from Amazon and Apple for Bitcoin as far back as 2015.

Another member of the Paxful Nigerian community, data analyst Obinna Uzoije, mentioned that in the early days of his career, he used Paxful to exchange the dollars he received from his employers as pay for Nigerian naira. At some point, freelancers in Nigeria who work for international companies were paid through Skrill, an online payment platform. Certain users on Paxful accepted the funds, so the freelancers could easily exchange it for Bitcoin or cash. Uzoije explained that this shutdown leaves a lot of other crypto enthusiasts in Nigeria wondering what the future holds for crypto marketplaces.

Related: Paxful to return lost Celsius funds to Earn users

Over-the-counter (OTC) vendor Akeem Abdullahi expressed that a generation of OTC vendors was created by Paxful’s escrow service. The vendors could buy gift cards from individuals who wanted to sell and were not literate enough to use the platform.

Some community members took to Twitter to express their worry about users getting their funds back. However, Youssef has assured users in a tweet that the Paxful team is working on clearing users’ send-outs.

Magazine: Journeys in Blockchain: Ray Youssef of Paxful

Paxful closing, CEO blames staff departures, regulatory challenges

Paxful CEO Ray Youssef said that United States regulators “don’t get it,” but infighting in the C-suite may have played a role in the company’s closure as well.

Peer-to-peer cryptocurrency marketplace Paxful announced on April 4 that it was suspending operations. Paxful founder and CEO Ray Youssef said in a blog that “key staff departures” and the regulation environment were behind the decision.

“We are not sure if it [the marketplace] will come back,” Youssef wrote. He added that all customer funds are accounted for and asked customers to withdraw their funds. The blog post provided links to other platforms that Paxful suggested for non-U.S. users to migrate to.

Youssef said in a Twitter Spaces meetup that Paxful is an American company that serves a global audience with a concentration on the global south. He said:

“A quarter of the company was compliance people […] Even that was not enough to please Uncle Sam.”

“American regulators have done a great job catching up […] for their pace” in the last five years, Youssef added, but “the regulators still don’t get it. They grow more suspicious every day.”

Related: Paxful CEO preaches Bitcoin self-custody, advises against crypto exchange

Youssef pointed to practices such as using gift cards to onboard people in Africa without bank accounts as an example of the company’s activities that drew regulatory attention in the United States.

Blocking U.S. customers and continuing operations “would have been an option if we had the staff. […] Business-wise it doesn’t make sense,” Youssef said.

In addition to its problems with staff departures, the company is in a legal dispute with co-founder and former chief operating officer Artur Schaback, who sued the company in January, naming Youssef and Jude Chidi Ogene as defendants. Ogene was Paxful’s chief legal officer until March, according to his LinkedIn profile. The complaint in that case has been sealed.

Paxful announced on March 29 that the company was refunding its Earn program users the funds that had been locked up in Celsius after its bankruptcy “in the coming days.”

Magazine: Bitcoin in Senegal: Why is this African country using BTC?

Paxful to return lost Celsius funds to Earn users

Peer-to-peer marketplace Paxful will refund its Earn program users impacted by Celsius Network’s bankruptcy.

Crypto marketplace Paxful will refund its Earn program users affected by the Celsius Network collapse in 2022, according to a Twitter thread posted on March 29 by company CEO Ray Youssef.

“I’ve personally taken action and will be refunding all affected Paxful users,” wrote Youssef, explaining that funds will be available for affected users in the platform’s wallet in the coming days.

Celsius filed for Chapter 11 bankruptcy in the United States on July 14, leaving thousands of depositors with their assets locked up on the crypto lending platform. At that time, neither the company nor CEO Alex Mashinsky commented publicly about whether depositors could expect any percentage of their funds. According to the bankruptcy filing, user deposits comprised most of Celsius’ liabilities, at $4.72 billion.

As of now, Paxful has not disclosed how much it is returning to customers. Cointelegraph reached out to Paxful, but did not receive an immediate response. 

During a bankruptcy hearing on Jan. 4, Judge Martin Glenn ruled that Celsius owns the funds in the interest-bearing Earn program under its terms of use, not its depositors. Youssef commented on the decision:

“The collapse [of Celsius] hurt countless users and damaged trust in our industry. Paxful, like many others, were paralyzed to act as we could not retrieve funds held by Celsius. Another hit came when the courts ruled that Celsius Earn Account belonged to Celsius’ bankruptcy estate, not to its users. This didn’t sit right with me then, and it still doesn’t sit right with me today.”

Bankruptcy proceedings for Celsius are still ongoing. Recently, a settlement plan between the committee of unsecured creditors and a group of account holders was approved, allowing account holders to recover 72.5% of their crypto holdings. The defunct platform announced in February that NovaWulf Digital Management would act as a sponsor for its restructuring plan, claiming that over 85% of Celsius customers would be able to recover roughly 70% of their crypto assets.

Crypto platform Paxful removes ETH from its marketplace

Paxful CEO Ray Youssef highlights Ethereum’s move to proof-of-stake, perceived centralization and token minting ability as reasons for the move.

Peer-to-peer cryptocurrency marketplace Paxful has removed Ether (ETH), Ethereum’s native token, from its marketplace, citing a number of concerns around the world’s second-largest cryptocurrency by market capitalization.

Paxful CEO Ray Youssef announced the move in a message to some 11.6 million users of the platform, which he subsequently shared on Twitter.

Youssef highlighted three major concerns around the Ethereum ecosystem that led to the marketplace removing ETH, citing Paxful’s intent to maintain its integrity and efforts to combat “economic apartheid” around the world driven by fiat monetary systems:

“I want to see a world where Bitcoin frees billions of people held back by this evil system, especially those unnecessarily harmed living in the global south.”

Ethereum’s switch from a proof-of-work (PoW) to proof-of-stake (PoS) consensus was the first reason given for the move. Youssef explained that PoW is the “innovation that makes Bitcoin the only honest money there is” and that Ethereum’s transition to PoS has turned ETH into a “digital form of fiat.”

Related: We need to move a lot faster on Global South Bitcoin adoption — Paxful CEO

Youssef also criticized Ethereum for not being decentralized and cited the protocol’s ability to allow the tokenization of assets as a driver of scams and fraud across the cryptocurrency ecosystem.

“The tokens that ETH has spawned have been scams that robbed people of billions. They have stolen valuable momentum away from Bitcoin and cost us years on our mission.”

Paxful’s CEO has also been a vocal advocate for Bitcoin and cryptocurrency self-custody in the wake of FTX’s collapse in November 2022. Youssef implored cryptocurrency users to shift BTC holdings to self-custody storage, with Paxful users also encouraged to follow suit.

Paxful CEO preaches Bitcoin self-custody, advises against crypto exchange

While some execs chose to double down on assuring the funds’ safety on their platforms, Ray Youssef, the CEO of crypto exchange Paxful, sided with the idea of self-custody.

The case for self-custody grows stronger as investors demand evidence of their assets over crypto exchanges. While some CEOs chose to double down on assuring the funds’ safety on their platforms, Ray Youssef, the CEO of crypto exchange Paxful, sided with the idea of self-custody as he took responsibility for over 11 million users.

The fall of FTX was an eye-opener for investors who predominantly entrusted crypto exchanges with safeguarding their assets. FTX CEO Sam Bankman-Fried, however, broke this trust by misappropriating users’ funds via Alameda Research. Ever since, numerous exchanges had to share wallet information as proof of reserves publicly.

In a tweet, Youssef distanced himself from “others in the industry,” reiterating that he never touched investors’ money, adding that:

“My sole responsibility is to help and serve you. That’s why today I’m messaging all of our [Paxful] users to move your Bitcoin to self-custody. You should not keep your saving on Paxful, or any exchange, and only keep what you trade here.”

Youssef will send weekly emails to users strongly advising against storing cryptocurrencies on all crypto exchanges, including Paxful. The entrepreneur further highlighted the problem with trusting custodians such as SBF, stating that “you’re at the mercy of […] their morals.”

Thanks to Satoshi Nakamoto, Bitcoin (BTC) — as an asset — is shielded from centralized control and manipulation. Youssef pointed out this unique opportunity that Bitcoin brings to the table — “the chance to finally be in control.”

While he strongly advised users to take total control over their assets, Youssef assured their funds’ safety for investors that choose to store their Bitcoin on Paxful. Moreover, the entrepreneur plans to remove Ether (ETH) from Paxful as a tradable asset citing the lack of integrity compared to the Bitcoin ecosystem.

The plan to delist Ether from Paxful came after Jeremy Garcia, the founder and CEO of Satoshi’s Journal, pointed out Ethereum’s poorly designed protocol.

Related: Binance’s proof of reserves raises red flags: Report

SBF made the headlines after revealing his plan to start a new business for repaying the FTX investors.

“I would give anything to be able to do that. And I’m going to try if I can,” the infamous entrepreneur said when recently asked by BBC during an interview if he’d start a new business to repay FTX users.

Bitcoin trading volumes post new high in Philippines peso on Paxful

Weekly Bitcoin trading volumes in the Philippines peso grew steadily on Paxful this year and eventually hit a new high in July.

Despite some level of regulatory uncertainty around cryptocurrency in the Philippines, one platform has recorded a massive influx of Bitcoin (BTC) trading activity recently.

Bitcoin trading volumes in the Philippines have been on the rise over the past few months on the major peer-to-peer (P2P) crypto exchange Paxful.

According to data from the Bitcoin tracking website Coin Dance, Bitcoin trading volumes denominated in the Philippines peso (PHP) have been steadily growing on Paxful and eventually hit a new high in July.

Paxful’s Bitcoin trading volumes peaked at 111 million PHP ($1.9 million) during the week ending on Saturday, July 9, 2022. That was the biggest amount of PHP ever traded against Bitcoin on Paxful.

Paxful’s weekly Bitcoin trading volumes in PHP. Source: Coin Dance

The amount of actual Bitcoin traded on Paxful against PHP during that week was 92 BTC, slightly down from the previous week ending on July 2.

A notable influx in BTC trading started in early May, with Bitcoin trading volumes more than doubling over a period of months. As of early May, Paxful’s weekly BTC trading volumes in the Philippines amounted to just around 40 BTC.

Despite the recent upside in BTC trading volumes, the number of Bitcoins traded per week on Paxful in the Philippines is still yet to break the all-time high weekly volumes of 111 BTC posted in August 2020.

Paxful’s weekly Bitcoin trading volumes in the Philippines. Source: Coin Dance

The rise of Bitcoin trading on Paxful in the Philippines started amid a massive bearish trend in the cryptocurrency markets, with Bitcoin losing about 50% of its value since early May. BTC trading volumes in PHP surged even higher on Paxful after Bitcoin tumbled below $19,000 in late June.

The significant growth of PHP/BTC trading on Paxful also came amid the weakening local currency coupled with rising inflation. The Philippine central bank will reportedly decide whether to hike interest rates in mid-August amid inflation that is expected to grow above 7% by the end of the year from the current 6.1%.

The overall sentiment around crypto adoption in the Philippines has been rising in recent years as well, with many local firms moving into crypto trading. In April 2022, Philippines-based fintech firm PayMaya reportedly launched a crypto feature allowing users to trade, purchase and spend crypto on their accounts. The firm is among 19 official virtual asset service providers approved by the Bangko Sentral ng Pilipinas to offer virtual asset services.

Related: Binance ban off the cards, says Philippine trade and industry department

According to Terry Ridon, a local lawyer and convenor at the Infrawatch PH think tank, the rise in crypto adoption in the Philippines is a result of the COVID-19 pandemic.

“Crypto is becoming more popular in the Philippines because the country started shifting to digital payment systems during the pandemic. The ease of entry into the cryptocurrency markets through various apps has also allowed more people to participate in the sector,” he said in a statement to Cointelegraph.