Key highlights
- Paxful has announced that it is closing down its operations due to regulatory issues and the loss of significant employees.
- The company’s CEO assured customers that all their funds are secure, but there is uncertainty about the future of the marketplace.
- Paxful’s use of gift cards to attract African users without bank accounts raised regulatory concerns in the United States.
- The company is also facing a legal dispute with its former COO and co-founder, in addition to experiencing high employee turnover.
Paxful, a popular peer-to-peer Bitcoin exchange in Nigeria, announced on April 4th that it has shut down its operations.
According to Paxful’s founder and CEO Ray Youssef, the decision to shut down became necessary due to regulatory challenges and the departure of some of its important employees.
The CEO stressed that all customer funds have been accounted for, even as he urged them to withdraw their money, adding that “we are unsure if it [the marketplace] will come back.”
Focus on Paxful’s troubles
According to Youssef, tactics such as utilizing gift cards to add new users in Africa without bank accounts attracted regulatory concern in the United States.
Asides from issues of high employee turnover, the company is also embroiled in a legal battle with co-founder and former COO Artur Schaback, who filed a lawsuit against it in January and named Youssef and Jude Chidi Ogene as defendants. Until March, Ogene served as Paxful’s chief legal officer, as stated on his LinkedIn profile.
The backstory
On March 29, Paxful announced that it will begin returning any money that had been placed in Celsius users of its Earn program, following its bankruptcy.
Recall that on February 9, LocalBitcoins also made a formal announcement that the company was ceasing operations due to the challenging market conditions brought on by the continuing bitcoin winter. LocalBitcoins, a peer-to-peer (P2P) Bitcoin platform based in Finland, has ceased operations after serving clients for more than ten years.
- The CEO of LocalBitcoins, Nikolaus Kangas said: “We have regrettably concluded that LocalBitcoins can no longer provide its Bitcoin trading service, despite our attempts to overcome challenges and bring our transaction volumes and declining market share back to growth.”
What you should know
Recall that the Central Bank of Nigeria (CBN) banned crypto trading via Nigerian banks in 2021. Consequently, companies like Paxful became the preferred alternative for Nigerians hoping to trade cryptos. Between January 2021 and June 2022, Nigerians transacted more than $1.16 billion worth of Bitcoin on Paxful.
Although there are other P2P players in Nigeria, Paxful is the only P2P exchange that has made its data public and publicized.