The peer-to-peer crypto marketplace Paxful faced an abrupt shutdown last week, announced by its CEO Ray Youssef. The closure, initially attributed to 'key staff departures' and regulatory challenges in the United States, quickly became embroiled in significant controversy following an explosive report by CoinDesk and subsequent allegations from co-founder Artur Schaback.

In an exclusive interview, Ray Youssef denied several allegations, including the use of narcotics during office meetings, and shed light on the internal turmoil at Paxful. He corroborated reports of a serious internal conflict between himself and Artur Schaback, who was once the company's COO.

According to Youssef, the most immediate factor leading to Paxful's closure was the mass departure of its engineering, security, compliance, and operating staff. He stated that Schaback accused him of running a conspiracy and money laundering scheme, and subsequently refused to pay these employees' salaries. This led to virtually all critical staff leaving by March 31, resulting in platform malfunctions and downtimes. Youssef admitted that the feud with Schaback was the biggest problem he had been concealing from customers and the media.

Youssef revealed that Artur Schaback was legally fired from Paxful a year and a half prior due to incompetence, though the final report was never published to avoid public humiliation. This revelation contradicted Youssef's earlier tweet from August 2022, where he publicly stated, "I have no cofounders." In retrospect, Youssef admitted this tweet did not reflect the truth, explaining that while they co-founded the company, at that specific time, he did not consider Schaback a co-founder.

Regarding the allegations of cannabis use, which were part of Schaback's lawsuit and highlighted by CoinDesk, Ray Youssef vehemently denied attending management meetings under the influence or using hard drugs in the office. He clarified that he does use cannabis privately sometimes but dismissed the assertion of smoking it everywhere in the office as "completely insane" and a "character assassination." He attributed these charges to Schaback's aggressive legal strategy.

As of now, Ray Youssef no longer controls Paxful. A court order has appointed Srinivas Raju of Richards, Layton, and Finger as the Custodian of Paxful, granting him full authority over the company's operations and management. Raju is tasked with stabilizing the company and will recommend to the Court how Paxful's business should proceed. Youssef confirmed that Paxful employees will receive paychecks and that there are sufficient savings. He urged customers to withdraw their funds as the marketplace is currently down.

While acknowledging the possibility of Paxful returning to operation, Youssef emphasized it would not be under his leadership, as his co-founder seeks control. He expressed concerns about the company's future direction if Schaback were to lead it, fearing it could devolve into a "s*** coin operation" that preys on users in Africa and India with speculative instruments. Ray Youssef's personal plan involves a listening tour in Africa to understand financial challenges there.