Tensions between Paxful co-founders Ray Youssef and Artur Schaback spilled into public yesterday, as 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 to Paxful’s website, Youssef—the company’s CEO—urged Paxful’s users to withdraw funds from its platform and explore alternative venues, citing the departure of key employees and ongoing regulatory headwinds in the U.S. He wrote that it was unclear whether Paxful will resume operations, suggesting that its future was in jeopardy.
During a subsequent Twitter Spaces, Youssef said that a lawsuit filed against Paxful and himself by Schaback was an untenable factor weighing on the firm, claiming that it prompted important team members to quit.
“I couldn't do it anymore, ethically, so I took some massive legal liability, and I said [...] I'm shutting this down,” Youssef said. “He had a court order preventing me from doing anything, but I said, fuck that.”
Schaback told Decrypt that Paxful’s decision to suspend operations came as a shock. And while he conceded that the platform's suspension of operations could end things entirely, Schaback said he plans to get the marketplace up and running again.
“I was not expecting that it’s going to be permanent,” he said. “My plan is to reopen Paxful again with a new business direction.”
Schaback claimed that Paxful’s announcement yesterday was part of an “orchestrated” effort to move the company’s business outside of U.S. jurisdiction while blaming him for the company’s troubles, which Youssef later denied to Decrypt.
Schaback said the root of their disagreement can be traced back to 2021 when a potential deal between him and Youssef fell through. It involved potentially buying out Schaback’s stake in Paxful.
“He decided not to, basically, buy out my shares or find investors because he found a way to just completely take control of the company,” Schaback said.
When Youssef directed 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.”
Noones’ website states the company is based out of Europe and the United Arab Emirates, founded by “a small group of passionate Bitcoiners who are dedicated to peer-to-peer in the Global South,” including Nicholas Gregory and Yusuf Nessary.
Youssef said he doesn’t have a direct role at Noones but supports the company, per CoinDesk reporting. Yet, Schaback pointed out that Noones and Paxful share notable similarities—including what appears to be a database of users.
Multiple accounts on Twitter reached out to Paxful users on Tuesday, saying that they “can log in to Noones with your Paxful credentials & your KYC, trades, etc will be there already.”
For those who use Paxful:
1. A new platform recommended by Paxful CEO @raypaxful is live; Noones @noonesapp
2. You can log in to Noones with your Paxful credentials & your KYC, trades, etc will be there already.
3. Log in to Paxful then transfer your funds from Paxful to…
— Grey Jabesi (@greybtc) April 4, 2023
Paxful clarified on Twitter that the two companies are not affiliated, directing an account to Noone’s website for raising questions or concerns. “Please be advised that Paxful is not affiliated with Noones; it is a separate platform,” the firm’s account said.
Hi, @Ianosg5. Thanks for getting in touch. Please be advised that Paxful is not affiliated with Noones; it is a separate platform. You may direct your questions and/or concerns related to Noones to their website. Thank you.
— Paxful (@paxful) April 5, 2023
Some users in what appeared to be Noones’ official Telegram channel said they were able to log in to the platform using their Paxful credentials without any issues, 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 withdraw funds, Youssef told Decrypt.
“I want the Paxful wallet to stay up for at least two years,” he said. “That means we have to get some passive revenue 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 “egregious, unauthorized, and self-interested actions,” such as “looting the Company’s coffers” and a “surreptitious scheme” meant to freeze Schaback out of Paxful, according to a court 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 gonna get a nine-figure exit, and that's why he was fighting so hard to do this,” Youssef posted on Twitter.
A spokesperson for Paxful declined to comment to Decrypt on questions related to the lawsuit, citing the firm’s role as a “nominal defendant.”
The lawsuit notes that Youssef and Schaback are the two sole members of the company’s board of directors. And as their conflict plays out, the impact of their disagreement extends far beyond Delaware or the U.S.
According to Coin Dance, Paxful’s trading volume totaled around $37 over the past week, with a significant portion of users based in countries like Argentina, Kenya, and India.
Yesterday, Youssef said that Paxful was a “great experiment” in part because the firm was able to bring Bitcoin to areas of the Global South—like starting in Nigeria and building out to the rest of Africa over time. He said, “It made places fertile.”