Ray Youssef, the CEO of peer-to-peer marketplace Paxful, announced a shutdown of the crypto marketplace last week. However, the controversies that have followed the development are enormous.
Although Ray blamed ‘key staff departures’ and regulatory issues in the United States for the closure, an explosive CoinDesk report opened a can of worms by making several allegations against the administration of the defunct company.
Amongst one allegation levelled against Ray Youssef was the use of narcotics during office meetings. However, in an exclusive interview with Technext, Ray Youssef denies the allegations and sheds more light on what happened behind the scenes at Paxful.
Remote and immediate causes of Paxful’s problems
The CoinDesk report revealed that there was a serious internal war between the two Paxful co-founders, Ray Youssef, the CEO and Artur Schaback, who was once the COO of the company. Ray corroborates this story in the interview with us.
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He recounts that the most immediate factor that led to Paxful closure was the company engineers’ departure, all because Schaback accused Ray of using operating, compliance and security staff to run a conspiracy and money laundering scheme.
“As of March 31, the last day of March, Paxful, at the end of business on that day, had almost no engineers in the company. All the engineers basically left, the ones who could actually work on the platform, maintain the platform, security platform. All the security people resigned. We had no compliance and we had no operating staff.”
“He (Schaback) refused to pay their salaries, that’s why they left. We owed $6 million in compliance bills. He even filed in court documents that he thought they were all money laundering operations. He actually put this in court documents.”
What happened after those departures was a series of malfunctions and downtimes, which Ray Youssef says he has been spending 20 hours a day on fixing for the past week, all in a bid for customers to get their money out.
Ray admits that the biggest problem he has been hiding from customers and the media for a while is the feud between him and his cofounder, Artur Schaback. He didn’t want to get public with the issues for private reasons.
Ray says he should have sued Artur before the latter did, but there’s a reason he didn’t do that. He, however, declined to reveal the details. According to him, Artur Schaback was fired from Paxful a year and a half ago for incompetence.
“There were a lot of issues. We never published the final report, but he refused to partake in the investigation. We just fired him legally. I didn’t want to humiliate him by putting all that in one place again.”
Although it has now been confirmed that Paxful has a co-founder apart from Ray, On August 23, 2022, Ray tweeted:
“To be clear. I am the founder of Paxful. I have no cofounders. Anyone claiming to be is highly sus. Nor will I ever ask you for bitcoin or ask you to invest.”
In retrospect, Ray Youssef says that tweet doesn’t make him look good because it’s not true.
“Me and him co-founded the company, but at the time, at that point, I didn’t consider him a co-founder. He doesn’t have to consider me a co-founder either.I was hearing he was going around and telling everyone, yeah, I’m the co-founder of Paxful”
The Cannabis allegations
The Schaback lawsuit also alleges that Ray Youssef attended management meetings under the influence of “unspecified substances” and would use hard drugs in the Paxful office. The Coindesk report also hammered on those charges and said Ray didn’t respond to their questions early.
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Ray Youssef, however, tells Technext that Coindesk messaged him in the middle of the week while he was fighting the fires and trying to get everyone their money. So he didn’t have time to answer.
In response to those accusations, Ray Youssef says:
“No, those allegations are completely false now. It was full of lies. I do cannabis sometimes, but this assertion that I was walking around the office smoking weed everywhere in front of it is completely insane. Where did that come from?
This was an attack on my character and a really nasty one. He’s got some really good lawyers working for him, real guys, like pit bulls, and they just attack every single angle.
I mean, if you’re talking about the fact that I smoke weed privately, I admit. That’s true. But it’s like this entire character assassination is very painful. It’s not professional. It doesn’t belong in this discourse. And it shows you what the other side is trying to do. He’s lost the legal battle. There’s nothing really to fight. So now he’s just going through the crowd and trying to play a game of chicken.”
Will Paxful be back?
Ray Youssef says he no longer controls Paxful. A Paxful spokesperson further told Technext that the founders recently agreed to have Srinivas Raju of Richards, Layton, and Finger appointed by Court Order as the Custodian of Paxful.
As Custodian, Srini has full authority and control of the Company, its operations, and its management. Over the next month, Srini will try to help stabilize the Company and its operations while preparing a recommendation (to the Court) regarding how the business of Paxful should proceed. Srini is considering all possible recommendations for Paxful’s business.
Basically, the company is now in the hands of a custodian, and there are enough savings in the company.
“So at this point, guys, I have two bitcoins from my own wallet, actually, which I still haven’t taken out yet. It’s just money I keep in my wallet. I still haven’t taken it out yet until I make sure everyone gets their money. So I’m still tracing all these transactions, but I’ll tell everyone right now, the marketplace is currently down, so please withdraw your funds, self custody, or go trade somewhere else. I think there’s quite a few bitcoins left in our cold storage and hot wallet.”
Ray Youssef confirms that Paxful employees will get paychecks. He admits that there’s a possibility that Paxful could be back in operation, but it definitely would not be him at the helm of affairs because his co-founder wants to get control of the whole business.
He, however, cannot vouch for the Bitcoin company when it’s back because:
“Someone like him I don’t trust holding your money and they would turn into just a s*** coin operation. They would take the name, they would add a bunch of s*** coins, and they would try to basically prey on Africans and Indians and all these people with speculative instruments.”
Subsequently, Ray Youssef plans to go on a listening tour in Africa, hear from people and understand their financial hurdles.
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