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One of the world’s largest peer-to-peer (P2P) cryptocurrency exchanges by trading volume, Paxful, has announced that it is shutting down its operations.
The announcement is a shock to users, especially after the exchange recently announced that it was returning funds to users of its Earn program.
Paxful Shutting Down
Following the announcement, the peer-to-peer exchange directed users to retrieve their funds from the platform. Ray Youssef, the co-founder, and CEO of Paxful, stated in a blog post regarding the closure,
“This will probably come as a shock to many. All customer funds are accounted for. Please withdraw them and, if you can, self-custody.”
The blog post cited several operational factors influencing the decision, among them regulatory challenges for the industry and key staff departures. The blog post further added,
“While I cannot share the full story now, I can say that we, unfortunately, have had some key staff departures. Also, regulatory challenges for the industry continue to grow, especially in the peer-to-peer market and most heavily in the U.S. While we work through these issues, we have taken the most secure option and ask you to explore self-custody and trade elsewhere.”
The announcement of the closure came just days after Youssef promised that they would be refunding the affected users of the Paxful Earn program. Paxful’s Earn program allowed users to earn a yield on their Bitcoin through a partnership with Celsius. However, Celsius filed for bankruptcy in July 2022.
Is There A Bigger Reason?
While nothing was mentioned about it in the blog post, Youssef stated during a Twitter spaces that one of the factors that prompted the shutting down of the platform was a lawsuit. The lawsuit in question was filed by a Paxful co-founder who has sued the firm and Youssef after being kicked out of the company over a year ago. Youssef had said during the interaction,
“My co-founder sued the company and sued me. I have a lawsuit over my head right now.”
While the co-founder in question was not named, Youssef likely referred to co-founder Artur Schaback. Schaback had filed a lawsuit against Youssef in the Delaware Chancery Court in January. A Paxful spokesperson commenting on the developments stated,
“Paxful is a nominal defendant in the litigation, so we cannot share much about the case. But I can confirm that Artur Schaback is a co-founder and current board member of Paxful.”
Youssef added that the Paxful staff was mainly driven away from the company thanks to the co-founder’s legal team.
“His litigation team was really nasty. They drove away all of our senior-level staff who just couldn’t deal with this guy anymore.”
He stated that the situation had gotten so bad that there were no engineers, compliance team members, or security personnel left at the company. This is why he ultimately decided to shut down the company. The CEO and co-founder added that he subsequently hired an engineering team to assume control of the Paxful digital wallet, which is still being used to safekeep user funds.
Users Urged To Withdraw Funds
Paxful has urged users to withdraw their funds, adding that despite the impending closure, the Paxful wallet is operational for users to withdraw their funds.
“Paxful database is a bit overloaded now as everyone is withdrawing funds. It is making transfers slow. I promise funds r safe, and they will clear soon.”
Paxful was founded in 2015 and has become the latest firm to fall during the ongoing crypto winter. Headquartered in New York, the company also has offices in Russia, The Philippines, and Estonia. The company also allowed users to trade Bitcoin and Ethereum, two of the largest cryptocurrencies by market cap. However, it dropped support for Ethereum in December 2022. Paxful was at the forefront of driving crypto adoption in West Africa and the Global South.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice