Bitcoin Marketplace Paxful to Shut Down Amid Legal Battle With Co-Founder

Peer-to-peer Bitcoin marketplace Paxful has announced it will shut down, asking users to withdraw their funds from the platform.

“This will likely come as a shock to many,” Paxful co-founder and CEO Ray Youssef wrote in a blog post. “All customer funds are accounted for. Please withdraw them and, if you can, self-detention.”

The blog post cited “departures of key personnel” and “regulatory challenges for the industry,” but Youssef said during a Twitter post on Tuesday that the decision to shut down the platform was also influenced by a lawsuit filed by a Paxful co-founder who is suing Paxful and Youssef after being “kicked out of the company” more than a year ago.

“My co-founder sued the company and sued me,” Youssef said. “I have a court case over my head right now.”

Although he did not explicitly name the plaintiff, Youssef is likely referring to co-founder Artur Schaback, who filed a lawsuit in Delaware Chancery Court against Youssef in January, according to a trial hosted on CourtConnect.

Schaback could not be reached for comment Decrypt.

“Paxful is a nominal defendant in the lawsuit, so we cannot share much about the case,” said a Paxful spokesperson. decrypt, also decline to identify the plaintiff. “But I can confirm that Artur Schaback is the co-founder and current board member of Paxful.”

The announcement of Paxful’s closure comes just days after Youssef promised to make Paxful Earn customers whole. The service had allowed Paxful customers to earn a return on Bitcoin through a partnership with Celsius, a prominent crypto lender that archived for bankruptcy in July last year.

That’s what the Paxful spokesperson told Decrypt that, despite the company’s impending shutdown, Paxful’s wallet is operational and “users can get their money out safely.”

Youssef claimed that Paxful’s senior staff were largely driven away from the company due to actions taken by the unnamed co-founder’s legal team. Youssef added that the co-founder refused to pay any of Paxful’s employees.

“His team was really nasty,” he said. “They drove away all the senior-level staff who just couldn’t deal with this guy anymore.”

By last Friday, it had gotten to the point where there were no engineers, compliance team members or security personnel left working at the company, Youssef said. Ultimately, he said, he decided at the time to shut down the company due to safety concerns.

Youssef claimed he later hired an engineering team to take control of Paxful’s digital wallet – presumably still used for holding funds. He said it was the right thing to do, even though it conflicted with a court order he has received.

“I managed over the weekend to get an engineering team to secure everything,” he said. “I had to make an ethical decision.”

Originally founded in 2015, Paxful is the latest firm to succumb in the middle of the crypto winter. The company is headquartered in New York and has offices in Estonia, the Philippines and Russia, according to one press release.

At one point, the company allowed customers to trade Bitcoin and Ethereum — the two largest cryptocurrencies by market capitalization — along with leading stablecoin Tether. But the company fell support for Ethereum last December.

Youssef said Paxful was ultimately successful in the sense that it promoted Bitcoin adoption in West Africa and other areas of the Global South. In accordance Coin dancetraded volume on Paxful around $35 million in the past week, with users based in countries such as Argentina, Kenya and India.