The future of Paxful Bitcoin Exchange in flux as the co-founders battle

The tension between Paxful co-founders Ray Youssef and Artur Schaback became public yesterday, when the peer-to-peer Bitcoin exchange abruptly announced it had suspended operations. While Schaback hopes to resume operations, Youssef has apparently recommended a new provider to Paxful users.

In a Tuesday message posted on Paxful’s website, Youssef — the company’s CEO — urged Paxful’s users to pull funds from the platform and explore alternative venues, citing key staff departures and ongoing regulatory headwinds in the US. He wrote that it was unclear whether Paxful would resume operations, suggesting that its future was in jeopardy.

During a subsequent Twitter Spaces, Youssef said that a lawsuit filed against Paxos and himself by Schaback was a unsustainable factor weighed on the firm, claiming it caused key team members to quit.

“I couldn’t do it anymore, ethically, so I took a massive legal responsibility and I said […] I’m closing this, Youssef said. “He had a court order preventing me from doing anything, but I said, screw it.”

Schaback told Decrypt that Paxful’s decision to cease operations came as a shock. And while he admitted that the platform’s suspension of operations could end things altogether, Schaback said he plans to get the marketplace up and running again.

“I didn’t expect it to be permanent,” he said. “My plan is to reopen Paxful again with a new business direction.”

Schaback claimed Paxful’s announcement yesterday was part of an “orchestrated” effort to move the company’s operations outside US jurisdiction while blaming him for the company’s problems, something Youssef later denied. Decrypt.

Schaback said the root of their disagreement can be traced back to 2021 when a potential deal between him and Youssef fell through. That meant potentially buying out Schaback’s stake in Paxful.

“He decided not to buy out my shares or find investors because he found a way to take complete control of the company,” Schaback said.

When Youssef told people to explore other trading venues on Paxful’s website yesterday, he suggested users choose another firm called Noones – a “super app” with similar features labeled as “Ray’s recommendation”.

No website says the company is based out of Europe and the United Arab Emirates, founded by “a small group of passionate Bitcoiners dedicated to peer-to-peer in the Global South,” including Nicholas Gregory and Yusuf Nessary.

Youssef said he does not have a direct role in Noones, but supports the company, per CoinDesk reporting. Still, Schaback pointed out that Noones and Paxful share notable similarities — including what appears to be a database of users.

Several accounts on Twitter reached out to Paxful users on Tuesday, saying they “can log into Noones with your Paxful credentials and your KYC, trades, etc. will be there already.”

Paxful clarified on Twitter that the two companies are not affiliated, and sent an account to Noone’s website to raise questions or concerns. “Please note that Paxful is not affiliated with Noones; it is a separate platform, says the company’s account.

When an account contacted Noones on Twitter asking for help logging into the platform with their Paxful credentials, Noones responded: “Please cross-check the information provided.”

Some users in what appeared to be Noone’s official telegram channel said they were able to log into the platform using their Paxful credentials without issue, while others asked for help.

The functionality is part of several referral deals between Paxful and other marketplaces as the company looks for any passive income it can get to stay afloat while users cash out, Youssef said Decrypt.

“I want the Paxful wallet to stay up for at least two years,” he said. “That means we have to bring passive income into the company to pay for engineers and staff.”

The two co-founders expressed differing accounts not only about Paxful’s potential future, but also regarding the nature of Schaback’s lawsuit — filed in Delaware Chancery Court in January.

Schaback’s lawsuit accuses Youssef of several “cruel, unauthorized and self-interested acts,” such as “looting the company’s coffers” and a “concealed scheme” intended to freeze Schaback out of Paxful, according to a legal document. Youssef has denied these allegations.

Instead, Youssef claimed yesterday that the lawsuit is an attempt by Schaback to extract as much money as possible from the company. “My co-founder thinks he’s going to get a nine-figure exit, which is why he fought so hard to do this,” Youssef wrote on Twitter.

A spokesperson for Paxos declined to comment Decrypt on questions related to the lawsuit, referring to the firm’s role as a “nominal defendant.”

The lawsuit notes that Youssef and Schaback are the only two members of the company’s board of directors. And as their conflict unfolds, the impact of their disagreement extends far beyond Delaware or the United States

In accordance Coin dancePaxful’s trading volume was around $37 last week, with a significant portion of its users based in countries such as Argentina, Kenya and India.

Yesterday, Youssef said Paxful was a “great experiment” in part because the firm was able to bring Bitcoin to areas of the Global South – starting in Nigeria and expanding to the rest of Africa over time. He said, “It made places fertile.”