In Nigeria, thousands of cryptocurrency investors and traders have reportedly lost access to millions of dollars. Paxful Incorporated, a major cryptocurrency services firm based in Estonia, is accused of large-scale fraud, reportedly suspending the accounts of Nigerian users.
Users are now locked out of their online wallets with the keys to their funds presumably locked inside.
Paxful’s Work in Developing Nations
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
Paxful is widely used and active in the African continent. The company has built schools in Rwanda, previously stating a goal to build up to 100 schools.
The firm also established $15,000 in scholarships for female Afghan refugees in the US to further their education and has reportedly taken action to establish a blockchain hub in the Nigerian city of Lagos.
@paxful and @raypaxful your team and company locked my account with over 1.5btc and each time I talk to them they don’t reply me it’s unfair on me who invested all my money in Btc only for your team to take it without fair hearing omobolawa3 is user
— patience has it all (@STBOLLY2) April 6, 2019
An NGO called United Resolve for Global Peace has made a petition to the Economic and Financial Crimes Commission accusing Paxful of fraud. The EFCC confirmed receipt of the petition and will now launch an investigation into the matter regarding the deactivated accounts and locked funds.
Hi David! Our goal is to provide a safe and secure bitcoin trading platform for all—that is why we have our Terms of Service. These are simple guidelines created solely for everyone's safety, whether it's your crypto, your wallet or every trade our customers do on our platform.
— Paxful (@paxful) April 8, 2019
The UGRP filed the petition on April 02, stating that the accounts involved have not broken any of the rules of the platform or engaged in fraud.
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.
The petition points out that Paxful generated $20 million in profit in 2018, and that 40% of that came from Nigerian customers.
The respondent has, through willful disregard for contract and rules of commercial transaction, done a lot to rob Nigerians of their hard-earned money by its unrestrained activities of blocking their accounts and stating that investigation will be conducted. At the end of the investigation, the respondent always comes out to say the vendor has done nothing wrong and thereafter release their accounts without the funds in it.
One trader whose $60,000 in crypto assets have been withheld accused Paxful CEO Ray Youssef of referring to Nigerians as scammers in an online forum, although so far no forum post has been found to support this.
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
Youssef has taken a firm stance on Twitter, insisting that bad practice and fraud from Paxful users are the cause of the issue. Speaking to CCN.com, Youssef expressed his doubts regarding the status and of the organization making the petition in the first place.
The exact nature of the “NGO” is unknown.
The company’s Twitter account has taken a more neutral tone but also asserts that all accounts have been banned for good reason.
Cryptocurrencies are not authorized by the Nigerian central bank. In March of last year, the Nigeria Deposit Insurance Corporation (NDIC) warned Nigerian citizens against the use of cryptocurrencies, pointing out that the assets are not NDIC insured, perhaps leaving investors with little recourse in situations where funds are lost or disputed.