Scammers Gonna Scam: Paxful CEO Speaks on Nigerian Controversy
- Paxful was recently accused of unfairly blocking the accounts of Nigerian users. Ray Youssef tells Paxful's side of the story.
The global nature of the cryptocurrency industry has truly changed the world: people who previously didn’t have access to financial services have found themselves with life-altering resources; companies and individuals have the open opportunity to access a global financial network that didn’t even exist ten years ago.
But the global nature of the crypto industry can also lead to some crossed wires. Mismatched regulations, miscommunications, and other kinds of mishaps can lead to trouble.
Recently, Finance Magnates caught up with Ray Youssef, founder and CEO of the Estonia-based cryptocurrency exchange Paxful, to speak about the exchange’s current projects, future plans, and some recent controversy.
A Recent Bout of Bad Press
We asked Youssef to clear up some nasty claims that were made about the exchange earlier this month. A number of cryptocurrency-related news outlets published reports alleging that Paxful had blocked a number of its Nigerian users from accessing millions of dollars’ worth of cryptocurrency that was stored inside the exchange.
The reports explained that the United Global Resolve for Pace, a Nigerian NGO, filed a petition to the Central Bank of Nigeria, the Economic and Financial Crimes Commission, as well as several other government bodies, asking for action against Paxful.
“A few days ago, our organisation was approached by some Nigerians who complained bitterly that Paxful Incorporated, the company that owns the online cryptocurrency trading and exchange platform, ‘https://paxful.com’ has been ripping them of their life investment in cryptocurrency by suspending their accounts, deactivating their wallets and refusing to return the value in their accounts to them even after investigation and finding that they were not involved in any fraudulent activities,” reads the petition, which was filed on April 2, 2019 and signed by UGRP Executive Director, Shalom Olaseni.
“Paxful is doing and always will do what is in the best interest of our responsible customers."
However, Youssef has vehemently denied the allegations made in the petition. “These claims are absolutely false,” he told Finance Magnates. “We recently identified indicia of potential activity in violation of our Terms of Service on our platform involving certain Nigerian accounts and we took appropriate action to rectify these issues.”
Tip: When two of your other accounts are banned because you have ignored all warnings, any new accounts will also be banned because YOU are banned. Marketplaces cannot survive with such bad actors. Any other accounts you make will forever be banned. Do not return please.
— Ray Youssef (@raypaxful) April 7, 2019
“Paxful is doing and always will do what is in the best interest of our responsible customers and will continue to implement best-in-class procedures despite any blowback from specific users and groups. We take these allegations very seriously and have a zero tolerance policy for fraud and illicit activity of any kind on our platform.”
Accounts May Have Been Temporarily Blocked as KYC Requirements Were Increased
Youssef also explained that some of the confusion around blocked accounts might have come as a result of the exchange’s new KYC and AML requirements. “As part of our commitment to our users and our promise to provide a safe and secure marketplace we have teamed up with Jumio, a digital customer identity verification company, in order to improve AML procedures and combat fraud on our marketplace globally,” he said.
“Account holders that were unable to provide additional information and verification of their identity were flagged in coordination with clear Terms & Conditions which a user is required to read and accept prior to creating an account on our platform.”
“The funds in these accounts are held until Paxful can resolve its concerns. Should Paxful determine that the account holder was not engaged in a violation of the Terms & Conditions and was not engaged in illicit activity, the account will be restored and the funds in that account will be available to that user.”
We're sorry to hear about this. Unfortunately, we do not have access to your account from here and in certain cases, appeal is not possible if our moderators have reviewed your case again and ended up with the same result.
— Paxful (@paxful) April 8, 2019
“If these accounts are found to be participating in illicit behavior at the cost of our honest customers, they will be terminated. Ultimately, our desire is for the proceeds of any crime to be returned to victims in cooperation with the directives of any local authorities.”
New Compliance Hires for a Heightened KYC and AML Strategy
Paxful has also added several new hires to its ranks in order to improve its AML and KYC strategies.
In addition to the partnership with Jumio, “we’ve also invested in an innovative and experienced Compliance and Information Security team, he continued. This includes the addition of Lana Schwartzman as the exchange's new Chief Compliance Officer. “Lana has 14 years of experience in compliance and AML matters and, prior to coming on as CCO at Paxful, she was a manager in the Regulatory and Compliance Risk Group at Grant Thornton LLP,” Youssef explained. Schwartzman has also spent time at Deutsche Bank and Morgan Stanley.
The exchange has also added Dmitry Moiseev as its new Information Security Manager. “Dmitry has over 12 years of experience in Information Security and is an expert in high-risk personal data security in the financial sector. Prior to joining Paxful, he was an Information and Security Manager at Western Union.”
”Scammers have always and will continue to evolve and find new ways to defraud honest customers”--In Other Words, Scammers Gonna Scam
It could be argued that this whole incident could have been avoided in the first place if there had been laws in place that would have deterred certain users from abusing the platform in the first place. However, Youssef doesn’t believe that having a better set of regulations in place would have necessarily prevented this from happening.
“Unfortunately, scammers have always and will continue to evolve and find new ways to defraud honest customers,” he said. “Even in traditional financial sectors that are currently subject to significant Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term, scammers still persist.”
“While we believe the cryptocurrency space will become more regulated as the industry grows, we and other industry participants must remain vigilant to ensure safety for our customers. That being said, we welcome any opportunity to speak with regulators on how to better understand cryptocurrency and to discuss the ongoing effort to remove fraudulent activities from this innovative space.”
”Accounts found to be conducting fraudulent behavior will be terminated.”
For now, “Paxful is currently performing all necessary due diligence in order to determine the legitimacy of every account on the platform,” Youssef said. “Should we determine an account holder was not engaged in a violation of the Terms & Conditions and was not engaged in illicit activity, the account will be restored and the funds in that account will be available to that user. Accounts found to be conducting fraudulent behavior will be terminated.”
Additionally, Youssef said that Paxful is doing its best to deal with the situation at hand. “We have noted the concerns raised by some of our Nigerian customers regarding access to their Paxful accounts. Although only a relatively limited number of Paxful users appear to be adversely impacted in Nigeria, we are very eager nonetheless to address the issues raised by these customers.”
“Paxful has also had a discussion with the Non-Governmental Organization United Global Resolve for Peace with respect to the selection of Paxful users they represent. We also welcome an opportunity to engage with any local authorities who wish to discuss this matter.”
Paxful is also continuing its work on a number of charitable initiatives in Africa. “We believe that the development of proper education centers is fundamental to moving countries like Rwanda forward, while also increasing their standard of living,” Youssef explained. “Education is the crucial stepping stone in serving people in developing nations and improving their quality of life.”
“Paxful’s #BuiltWithBitcoin initiative began in 2017 to promote philanthropy and charity within the cryptocurrency industry. We plan to construct 100 schools in Africa and donate money for wells and other projects. The second school came after the success of the first school which was completed in December 2017 and serves 110 young students between the ages of 3-6.”
Question from Reddit: "These types of things are hard to trust. Many companies put up a photo op and then support and funds dry up.That first school was to be opened 9 months ago. Well? Did it?" WE JUST BUILT SCHOOL #2 :) #builtwithbitcoinhttps://t.co/Q8dnao3ByM pic.twitter.com/zTc6NzNJn6
— Ray Youssef (@raypaxful) October 24, 2018
“The second school Paxful built is the first primary school in the entire area dedicated to students between the ages of 6-15. The school consists of 6 classrooms, 6 full-time teachers, a cafeteria, bathroom stalls, solar panels, and a 35,000L water well system. The curriculum and teachers are provided by educational officials at the local level.”
“We hope to also encourage the cryptocurrency sector to contribute more to humanitarian projects. The #BuiltWithBitcoin initiative is an example of Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term being used as more than a speculative tool but a testament to the usefulness of cryptocurrency.”
According to Youssef, Paxful’s charitable initiatives are very closely aligned with the exchange’s corporate mission. “At Paxful our goal has always been to bring financial inclusion to the underbanked and unbanked through peer-to-peer finance. We will continue this effort in conjunction with our mission to give people a simple, fair, and secure platform for trading bitcoin.”
“In addition, we have some exciting announcements coming up next month which will aide in our availability and visibility in Latin America, as well as a series of new products and product updates that we hope to share this summer,” he said, adding that “most immediately we will be announcing a partnership that will establish expansion into Latin America.” Stay tuned.
The global nature of the cryptocurrency industry has truly changed the world: people who previously didn’t have access to financial services have found themselves with life-altering resources; companies and individuals have the open opportunity to access a global financial network that didn’t even exist ten years ago.
But the global nature of the crypto industry can also lead to some crossed wires. Mismatched regulations, miscommunications, and other kinds of mishaps can lead to trouble.
Recently, Finance Magnates caught up with Ray Youssef, founder and CEO of the Estonia-based cryptocurrency exchange Paxful, to speak about the exchange’s current projects, future plans, and some recent controversy.
A Recent Bout of Bad Press
We asked Youssef to clear up some nasty claims that were made about the exchange earlier this month. A number of cryptocurrency-related news outlets published reports alleging that Paxful had blocked a number of its Nigerian users from accessing millions of dollars’ worth of cryptocurrency that was stored inside the exchange.
The reports explained that the United Global Resolve for Pace, a Nigerian NGO, filed a petition to the Central Bank of Nigeria, the Economic and Financial Crimes Commission, as well as several other government bodies, asking for action against Paxful.
“A few days ago, our organisation was approached by some Nigerians who complained bitterly that Paxful Incorporated, the company that owns the online cryptocurrency trading and exchange platform, ‘https://paxful.com’ has been ripping them of their life investment in cryptocurrency by suspending their accounts, deactivating their wallets and refusing to return the value in their accounts to them even after investigation and finding that they were not involved in any fraudulent activities,” reads the petition, which was filed on April 2, 2019 and signed by UGRP Executive Director, Shalom Olaseni.
“Paxful is doing and always will do what is in the best interest of our responsible customers."
However, Youssef has vehemently denied the allegations made in the petition. “These claims are absolutely false,” he told Finance Magnates. “We recently identified indicia of potential activity in violation of our Terms of Service on our platform involving certain Nigerian accounts and we took appropriate action to rectify these issues.”
Tip: When two of your other accounts are banned because you have ignored all warnings, any new accounts will also be banned because YOU are banned. Marketplaces cannot survive with such bad actors. Any other accounts you make will forever be banned. Do not return please.
— Ray Youssef (@raypaxful) April 7, 2019
“Paxful is doing and always will do what is in the best interest of our responsible customers and will continue to implement best-in-class procedures despite any blowback from specific users and groups. We take these allegations very seriously and have a zero tolerance policy for fraud and illicit activity of any kind on our platform.”
Accounts May Have Been Temporarily Blocked as KYC Requirements Were Increased
Youssef also explained that some of the confusion around blocked accounts might have come as a result of the exchange’s new KYC and AML requirements. “As part of our commitment to our users and our promise to provide a safe and secure marketplace we have teamed up with Jumio, a digital customer identity verification company, in order to improve AML procedures and combat fraud on our marketplace globally,” he said.
“Account holders that were unable to provide additional information and verification of their identity were flagged in coordination with clear Terms & Conditions which a user is required to read and accept prior to creating an account on our platform.”
“The funds in these accounts are held until Paxful can resolve its concerns. Should Paxful determine that the account holder was not engaged in a violation of the Terms & Conditions and was not engaged in illicit activity, the account will be restored and the funds in that account will be available to that user.”
We're sorry to hear about this. Unfortunately, we do not have access to your account from here and in certain cases, appeal is not possible if our moderators have reviewed your case again and ended up with the same result.
— Paxful (@paxful) April 8, 2019
“If these accounts are found to be participating in illicit behavior at the cost of our honest customers, they will be terminated. Ultimately, our desire is for the proceeds of any crime to be returned to victims in cooperation with the directives of any local authorities.”
New Compliance Hires for a Heightened KYC and AML Strategy
Paxful has also added several new hires to its ranks in order to improve its AML and KYC strategies.
In addition to the partnership with Jumio, “we’ve also invested in an innovative and experienced Compliance and Information Security team, he continued. This includes the addition of Lana Schwartzman as the exchange's new Chief Compliance Officer. “Lana has 14 years of experience in compliance and AML matters and, prior to coming on as CCO at Paxful, she was a manager in the Regulatory and Compliance Risk Group at Grant Thornton LLP,” Youssef explained. Schwartzman has also spent time at Deutsche Bank and Morgan Stanley.
The exchange has also added Dmitry Moiseev as its new Information Security Manager. “Dmitry has over 12 years of experience in Information Security and is an expert in high-risk personal data security in the financial sector. Prior to joining Paxful, he was an Information and Security Manager at Western Union.”
”Scammers have always and will continue to evolve and find new ways to defraud honest customers”--In Other Words, Scammers Gonna Scam
It could be argued that this whole incident could have been avoided in the first place if there had been laws in place that would have deterred certain users from abusing the platform in the first place. However, Youssef doesn’t believe that having a better set of regulations in place would have necessarily prevented this from happening.
“Unfortunately, scammers have always and will continue to evolve and find new ways to defraud honest customers,” he said. “Even in traditional financial sectors that are currently subject to significant Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term, scammers still persist.”
“While we believe the cryptocurrency space will become more regulated as the industry grows, we and other industry participants must remain vigilant to ensure safety for our customers. That being said, we welcome any opportunity to speak with regulators on how to better understand cryptocurrency and to discuss the ongoing effort to remove fraudulent activities from this innovative space.”
”Accounts found to be conducting fraudulent behavior will be terminated.”
For now, “Paxful is currently performing all necessary due diligence in order to determine the legitimacy of every account on the platform,” Youssef said. “Should we determine an account holder was not engaged in a violation of the Terms & Conditions and was not engaged in illicit activity, the account will be restored and the funds in that account will be available to that user. Accounts found to be conducting fraudulent behavior will be terminated.”
Additionally, Youssef said that Paxful is doing its best to deal with the situation at hand. “We have noted the concerns raised by some of our Nigerian customers regarding access to their Paxful accounts. Although only a relatively limited number of Paxful users appear to be adversely impacted in Nigeria, we are very eager nonetheless to address the issues raised by these customers.”
“Paxful has also had a discussion with the Non-Governmental Organization United Global Resolve for Peace with respect to the selection of Paxful users they represent. We also welcome an opportunity to engage with any local authorities who wish to discuss this matter.”
Paxful is also continuing its work on a number of charitable initiatives in Africa. “We believe that the development of proper education centers is fundamental to moving countries like Rwanda forward, while also increasing their standard of living,” Youssef explained. “Education is the crucial stepping stone in serving people in developing nations and improving their quality of life.”
“Paxful’s #BuiltWithBitcoin initiative began in 2017 to promote philanthropy and charity within the cryptocurrency industry. We plan to construct 100 schools in Africa and donate money for wells and other projects. The second school came after the success of the first school which was completed in December 2017 and serves 110 young students between the ages of 3-6.”
Question from Reddit: "These types of things are hard to trust. Many companies put up a photo op and then support and funds dry up.That first school was to be opened 9 months ago. Well? Did it?" WE JUST BUILT SCHOOL #2 :) #builtwithbitcoinhttps://t.co/Q8dnao3ByM pic.twitter.com/zTc6NzNJn6
— Ray Youssef (@raypaxful) October 24, 2018
“The second school Paxful built is the first primary school in the entire area dedicated to students between the ages of 6-15. The school consists of 6 classrooms, 6 full-time teachers, a cafeteria, bathroom stalls, solar panels, and a 35,000L water well system. The curriculum and teachers are provided by educational officials at the local level.”
“We hope to also encourage the cryptocurrency sector to contribute more to humanitarian projects. The #BuiltWithBitcoin initiative is an example of Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term being used as more than a speculative tool but a testament to the usefulness of cryptocurrency.”
According to Youssef, Paxful’s charitable initiatives are very closely aligned with the exchange’s corporate mission. “At Paxful our goal has always been to bring financial inclusion to the underbanked and unbanked through peer-to-peer finance. We will continue this effort in conjunction with our mission to give people a simple, fair, and secure platform for trading bitcoin.”
“In addition, we have some exciting announcements coming up next month which will aide in our availability and visibility in Latin America, as well as a series of new products and product updates that we hope to share this summer,” he said, adding that “most immediately we will be announcing a partnership that will establish expansion into Latin America.” Stay tuned.