Journalists identify likely cause of Paxful shutdown

An unresolved court dispute between Paxful co-founders Artur Shabaka and Ray Yussef appears to have been the real reason behind the sudden ceasing of operations of Paxful’s P2P platform on April 4. Cointelegraph suggested as much.

The parties leveled a raft of allegations against one another, including misappropriation of company funds, money laundering, and even sanctions evasion against Russia.

Shabak held the post COO until February 2022, when he was allegedly removed from management by a board decision due to a conflict with Yussef — the firm’s CEO. The opponents diverged in their views on the market’s future and Paxful’s activities. The dispute also touched on “the legality of the ever-growing expenditures on unknown recipients.”

According to Shabaka, the platform transferred a large sum in bitcoins to a Turkish organization EMiR, which was described as a software developer. He noted that this company had no website for promoting products, and the physical address apparently belonged to a clothing manufacturer.

Subsequent payments from EMiR were allegedly received by the Saint Petersburg-based firm “DEXLECTICA,” registered by former Paxful managers. The company allegedly acted as a subcontractor.

In Shabaka’s view, the schemes were implemented to illegally siphon funds from the platform and launder money.

In a comment to Cointelegraph, Yussef called the allegations “ridiculous.” He said the transfers related to engineering services rendered.

“Shabak, with these accusations, blocked the payment of salaries to our engineers, claiming this was fraud and that there were no services. He was playing a game of ‘who folds first’ until the entire team of 80 programmers stopped working […]. He himself was forced to admit that he had seriously erred and allowed the debt to be restored at the board meeting,”

He dubbed his opponent’s legal practice as “bordering on terrorism” and noted that because of it the company lost many managers and staff.

According to Yussef, with his impending departure from the company, Shabaka should also leave the team.

The latter, commenting on Paxful’s closure, said it was a one-sided decision by Yussef. Shabaka is convinced that the former partner’s aim is to remove the platform from U.S. jurisdiction to concentrate power and to exclude him and other shareholders from governance.

In 2021, the platform launched a B2B service, which allows merchants to accept Bitcoin payments in multiple ways.