P2P crypto marketplace Paxful is closing, CEO explains what went wrong

The crypto industry has just lost yet another very popular platform that has been serving customers around the world for years — Paxful. The P2P cryptocurrency marketplace announced that it is suspending operations yesterday, April 4th. The platform’s CEO, Ray Youssef, explained the situation, stating that the main reasons behind the decision included an unfriendly regulatory environment and some key staff departures.

What happened?

The CEO said that it is unsure whether the platform would ever come back. There was no issue with the platform’s systems or the customers’ funds, and he stressed that all funds are accounted for. In fact, customers were asked to withdraw their money, given the fact that the platform intends to shut down.

Paxful even suggested other platforms for non-US users where they might migrate to and continue using a similar service. However, during a Twitter Spaces meetup, he went into greater detail, stating that the company, which is based in America, still serves global audience. The majority of users is from the global south.

Spaces on the suspension of the @paxful marketplace for us bitcoiners here https://t.co/59eH6We4Aq

— Ray Youssef (@raypaxful) April 4, 2023

However, he also noted that the company had quite a bit of a problem with the regulators. While a quarter of the firm was compliance people, this still wasn’t enough to satisfy financial watchdogs. “American regulators have done a great job catching up […] for their pace. The regulators still don’t get it. They grow more suspicious every day.”

Youssef then pointed to certain practices that some users had to turn to because they lacked different ways of getting money to the platform, such as using gift cards. This was a common practice for African users, as most of them lacked any bank accounts. However, this attracted the attention of the US:

If you want to learn the real use cases of #bitcoin turn your attention to Africa ! The youth are leading the way 💯 pic.twitter.com/CZWcXxXf5O

— Ray Youssef (@raypaxful) March 28, 2023

Paxful is wrapping up its business

Now, Paxful could have continued operation if it blocked US customers completely, which might have removed some of the attention from the marketplace. However, it did not have the staff to do so, and also, this would not make much sense business-wise, according to the company’s CEO.

The staff departure and regulatory issues were significant problems, but the company also had other issues to deal with, such as a legal dispute with its co-founder and former COO, Artur Schaback. Schaback sued the firm this January, naming Jude Chidi Ogene and Joussef himself as defendants.

Jude Chidi Ogene was the company’s chief legal officer until March of this year, and the complainant in that case has been sealed. Also, about a week ago, on March 29th, Paxful said that it had started refunding its Earn program users. The company will be returning the money that was locked up in Celsius after its bankruptcy in days to come, as it stated.