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A. Agapitov

Xsolla’s CEO Spends Like a Billionaire on Back of Company Cash

Aleksandr “Shurick” Agapitov spends hundreds of thousands of dollars to ensure his company’s name – Xsolla – is everywhere at major events in the video games industry, including at August’s Gamescom convention in Cologne, Germany.

You’ll find Xsolla’s branding splashed on pricey booths that feature baristas serving foamy lattes and at Go-Karting tournaments in Las Vegas. Xsolla has invested up to $275,000 per event in an effort to ensure it will remain the top payments facilitator in the $188 billion gaming industry. Millions of gamers have sent them their allowances, using Xsolla to make purchases in games like Roblox or Epic Games’ Fortnite.

Agapitov founded Xsolla and is the chief executive officer and sole owner. Promotional materials for his book describe him as a “visionary billionaire,” someone who has succeeded in a competitive industry despite relatively humble beginnings in the former Soviet Union. Legal and financial documents reviewed by Bloomberg and interviews with former employees suggest Agapitov leans heavily on corporate revenues to support his new, flashier lifestyle.

Xsolla and Agapitov say the company operates in strict compliance with best practices.

Nonetheless, at least six former executives have sued Agapitov or Xsolla since 2019. Two of the suits described concerns over the company’s financial practices or Agapitov’s use of company money, with one asserting he has used Xsolla like his personal piggy bank.

“Xsolla, a privately owned company, manages its financial affairs responsibly and in full compliance with applicable laws and regulations,” Xsolla president David Stelzer told Bloomberg. “Shurick is sole owner of the business, and all financial arrangements related to the company are vetted through highly reputable third-party legal, financial and tax experts and a robust internal team of lawyers and financial advisors,” Stelzer said. Stelzer disputes the accuracy of the financial documents obtained by Bloomberg and the numbers referenced in them.

Xsolla, which is relied on by several publicly-traded gaming companies, has previously explored the possibility of an initial public offering: Documents prepared by two investment banks in 2021 suggested the company could seek a valuation of as much as $3 billion. Stelzer said there are no current plans to IPO.

The company made about $67 million in revenue in 2020, according to an excerpt of a deposition by a former chief financial officer given in a case against Xsolla and reviewed by Bloomberg. Xsolla earned close to $100 million in revenue in 2021, Bloomberg has previously reported, and Agapitov says his PayPal-for-gamers now generates about double that.

Agapitov told Bloomberg in an interview that the company’s cash comes in part from the approximately 5% fee it collects from gamers’ transactions, with additional contributions from other business activities like publishing. People with knowledge of company finances who did not want to be identified fearing professional repercussions say his assessment of the revenue seems high.

Over $100 million—which would represent more than a third of the revenue generated between March 2021 and March 2023—was transferred from an Xsolla bank account to Agapitov personally, according to financial documents reviewed by Bloomberg.

In 2023 alone, Agapitov transferred about $70 million from the company to personal accounts, the documents show. That’s 64% of the total transferred in the two-year period. Millions more went to expenses including Agapitov’s Los Angeles mansion, a life-longevity nonprofit associated with Agapitov and private jets.

Amounts as high as $25 million at a time would be transferred back to the account from Agapitov, the documents show. These repayments occurred between five and 21 days after the initial transfer, according to the documents, but did not generally match the original sum in size.

Xsolla and Agapitov treat compliance as a “core value,” Stelzer said. Stelzer further contested the legitimacy of the documents Bloomberg reviewed, and said the figures from the documents are either incomplete or inaccurate without specifying which.

“Juxtaposing those figures against the company’s overall revenue for the period, is highly misleading and creates a fundamentally distorted picture of the company’s financial activities,” Stelzer said.

In a November suit filed in the Los Angeles County Superior Court, Xsolla’s former vice president of global accounting, Emil Aliyev, said he was fired after questioning a $40 million discrepancy in Xsolla’s account balances. The ex-employee also questioned the company’s regular transfers to a private Goldman Sachs account held by Agapitov. Documents from two other former executives’ lawsuits against the company reference Agapitov allegedly firing Xsolla’s former chief financial officer, Joe Chang, whom filings say raised concerns over the company’s adherence to US accounting law in 2018. Both Aliyev and Chang declined to comment.

In an interview with Bloomberg, Agapitov says former accounting executives Aliyev and Chang first raised their financial concerns after they were terminated and that neither were good fits for the company. In his complaint, Aliyev says he reported his findings to former chief financial officer Leon Perry in May 2023 and to Agapitov on July 28, 2023. Aliyev’s complaint says he was fired July 31. Chang did not sue the company.

Joshua Ronen, an accounting professor at New York University’s Stern School of Business, told Bloomberg that there are no prohibitions on transferring money to the owner of a privately-held company “because the owner is the sole decision-maker.”

Ronen said there may be stipulations against such transfers specified in contracts with gaming company partners as a way to protect them against any company-specific liquidity issues. Xsolla’s Stelzer says the bank accounts that hold gamers’ funds and remit those payments to publishers are kept separate.

In 2019, Xsolla’s coffers had fallen so low that the company struggled to pay an important bill. Executives were instructed to make as many cuts as they could and bring in whatever money they could get their hands on, according to one former employee who was present for these conversations and who asked not to be named discussing internal company matters.

Stelzer described the anecdote as “inaccurate,” and said any suggestion the company’s liquidity could be compromised is “reckless and inaccurate.”

According to the 2023 suit by Xsolla’s former vice president of global accounting, Xsolla had not passed an IRS audit since about 2017. Stelzer says its financial activities are “fully vetted” by internal qualified staff, professionals and reputable outside firms, but would not specify which ones when asked.

Video game industry growth has slowed, and many of the world’s top gaming companies have cut budgets and people, including more than 10,000 layoffs between January and August 2024.

Take-Two Interactive Software Inc., Ubisoft Entertainment SA, Bandai Namco, Epic Games, Roblox, NetEase Inc, Valve Corp., Sega Corp, Warner Bros. Discovery Inc., Amazon.com Inc.’s Twitch and HoyoVerse are all currently or formerly referenced as customers on Xsolla’s website.

Some gaming companies are developing their own in-house payments solutions, a potential competitive threat. In an August interview, Epic Games’ store head Steve Allison said that some developers have moved up to 50% of their revenue into payments companies like Xsolla. Now Epic’s new mobile storefront is garnering excitement from developers who want a more “scaled solution,” he said. On the other hand, recent regulatory moves in Europe have further boosted Xsolla’s ambitions. The company now offers a product that can help circumvent Apple Inc. and Alphabet Inc.’s vice grip on the mobile gaming marketplaces.

Clash of Clans developer Supercell Ltd ended its relationship with Xsolla in May. A representative would not give a reason. Fortnite publisher Epic Games Inc. is also rethinking its relationship with the company after 8 years, according to two people with knowledge of the situation who didn’t provide a reason for the reconsideration and didn’t want to be named because they were speaking on private company matters.

Stelzer says the company has “no reason to believe that Epic is reconsidering its relationship with Xsolla.” An Epic spokesperson declined to comment.

Other representatives at Xsolla’s current and former customers either declined to discuss their business with Xsolla or did not respond to Bloomberg’s requests for comment.

Xsolla itself has undergone several rounds of layoffs, and two chief financial officers left Xsolla entities this year: Leon Perry and Ketei Marakool. Neither responded to requests for comment. Stelzer said one recent CFO helped the company search for his replacement, who was announced in late July.

Xsolla’s CFOs have included Agapitov’s wife, who was shown in that role on a 2018 org chart reviewed by Bloomberg. Stelzer says the company has not had layoffs since 2021.

“Money is like numbers in a video game” for Agapitov, said Dmitrii Filatov, Xsolla’s former director of products funding, who is now the co-founder and CEO of gaming accelerator Narwhal. Filatov left the company last year. “Plus 100 experience, now you reach a new level,” he added, referring to the way gamers gain points that unlock and improve abilities in a video game as they play more.

Although several top game companies suspended sales in Russia, Xsolla has continued operations there after the country’s invasion of Ukraine, facilitating transactions between Russian gamers and Western video game companies. Ukraine’s minister of digital transformation, Mykhailo Fedorov, criticized this business decision last November.

“If we were operating there, we would be violating US sanctions, EU sanctions, Singapore sanctions, US export restrictions and a host of other things,” rival payments company Coda’s Chief Operating Officer Rick Phillips said in an interview.

A Roblox spokesperson confirmed that the company uses Xsolla for payments, including in Russia. Transactions in the region, less than 1% of Roblox’s bookings for the fourth quarter of 2023, amounted to millions of dollars.

Xsolla’s website showed it accepted transactions from the Central Bank of Russia’s SBP faster payments system until earlier this year, after Bloomberg reached out for comment. The Central Bank of Russia is sanctioned.

“Xsolla complies with all US and international laws and regulations in the communities and countries where it operates, including with US sanctions laws and regulations on Russia,” Stelzer said.

In his memoir, Once Upon Tomorrow, Agapitov, 40, describes growing up poor in the Soviet Union, once selling a copper cable for a comic book that became his prized possession. His home city of Perm is a 21-hour drive east of Moscow, close to the Ural Mountains.

In 2002, when Agapitov recalls the internet came to Perm, he saw an opportunity. The web, to him, was a tool that “leveled the playing field for me with anyone across the globe.”

“I wanted to use the internet to make money and build successful businesses,” he wrote.

At first, he got involved with online sports gambling sites and later digital currencies. At 21, Agapitov founded Xsolla’s predecessor, 2pay.ru, helping users swap digital currencies for a 1% fee. After briefly going under, 2pay would later relaunch and expand into cash kiosks with prepaid cards and e-wallets. The service let players among Russia’s growing population of gamers replenish their digital currencies.

By 2009, Agapitov began looking toward California, enticed by the idyllic lifestyle in shows like Laguna Beach. Less than a year later, he relocated to the Sherman Oaks area of Los Angeles.

For years, executives say they have had concerns over Agapitov’s spending.

Between March of 2021 and March of 2023, $109 million was transferred from Xsolla’s accounts to accounts controlled by Agapitov, documents show. These transfers included six individual transactions of $10 million or more at a time, which Agapitov would later pay back in large chunks. $102 million was replaced in that same period.

In conversations with employees during this period, Agapitov described the process of building a second house, according to people familiar with the matter who asked not to be named while discussing internal matters.

That house turned out to be a mansion in Sherman Oaks, next to his first house. Documents show total payments of $10 million from one Xsolla bank account to a high-end Los Angeles residential building company, a residential interior design firm and a residential architecture firm, according to the documents.

The documents also show transfers of over $400,000 from an Xsolla bank account to an anti-aging nonprofit called Open Longevity, of which Agapitov is a director and which is headquartered in Xsolla’s Sherman Oaks office. Company funds amounting to about $30,000 went toward private school tuition; $250,000 to an investment fund for nonfungible tokens; and $56,000 toward a 7-foot statue of Iron Man, the character from the Marvel film universe, according to the documents.

Xsolla’s Stelzer says that there was no wrongdoing, including with Open Longevity, and that all of the company’s financial arrangements are vetted by legal, financial and tax experts. Xsolla pays for approved education programs for its employees, Stelzer said. Stelzer could not comment on the Iron Man statue.

Agapitov’s Sherman Oaks property is “both a residence for [Agapitov] and a location that will be used for Xsolla business purposes,” Stelzer says.

Stelzer says that Xsolla paid for a “portion” of the residential building used for work purposes. “This development is expected to save Xsolla money by reducing or eliminating the need to rent venues for corporate events, and to position Xsolla as a leader in hosting industry events.”

The investment in NFTs “was made by an Xsolla-related asset, not Shurick personally,” said Stelzer, who described it as “a business investment.”

Emil Aliyev, the former vice president of global accounting who sued Xsolla in November alleging financial misconduct, was asked to sign a $380,000 separation and nondisparagement agreement before leaving the company, according to a document reviewed by Bloomberg. He agreed to have the suit dismissed with prejudice in March.

Xsolla’s founder said in a March interview with Bloomberg that he hadn’t read Aliyev’s complaint and that the $40 million loan was paid back in full with interest in October. Agapitov said Aliyev filed the lawsuit to boost his severance payment from the company. Aliyev declined to comment.

Two other suits from Xsolla’s former chief people officer and former vice president of product and publishing against the company alleged wrongful termination after raising concerns about a hostile work environment and reference Agapitov firing former Chief Financial Officer Joe Chang. According to one suit, Agapitov said in an email, “Today is Friday 13 best time for witch hunt,” after Chang allegedly brought up concerns over the company’s adherence to US accounting law. Chang did not respond to multiple requests for comment.

“Agapitov and Xsolla had a practice of terminating its executives without any warning if they made any complaints about potentially unlawful activity,” reads one 2022 suit, from the company’s former vice president of product and publishing, which was resolved in June and dismissed with prejudice. Through his lawyers at Domb & Rauchwerger, plaintiff David Daniels declined to comment.

The 2019 suit from Xsolla’s former chief marketing officer was settled. The 2020 suit from Xsolla’s former chief people officer was initially dismissed but in July, the court reversed its decision in Xsolla’s favor.

Updates with information on Roblox bookings from Russia.