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PayPal Freezes Mailpile Campaign Funds

528 points by capgre 13y ago

andyhmltn 13y ago
Why do people still use PayPal? Their service is just absolutely insane.
- DoubleMalt 13y ago
  Because indiegogo forces you to do it more ore or less. Glad I didn't donate yet. If necessary I'll fly over and deliver it in person ;)
  - HerraBRE 13y ago
    IndieGoGo actually support direct credit card donations, but a lot of people asked for PayPal as an option and we relented. So donating via. IGG actually works just fine - we have obviously disabled the PayPal option.
    - appleflaxen 13y ago
      Wait... really? Because when the ubuntu phone campaign happened, I wanted to buy one, and didn't purely because I couldn't figure out a way to do it without PayPal. Did I miss something on the page that would have let me pay without it? Oh well; too late now I guess.
      - gopher1 13y ago
        I was in the same boat as you with respect to the Ubuntu Edge, as it turns out each campaign can choose which payment services to use. Ubuntu chose to only enable PayPal.
  - andyhmltn 13y ago
    Oh dear, that's not a good situation then!
- webjames 13y ago
  My sentiments exactly, if this were the first instance of this i would forgive them however it is not; I fail to see why paypal is used given it recent history. Ref: GlassUp Campaign - Indiegogo Diaspora's Funding Account Skullgirls DLC by developer Lab Zero - Indiegogo Paypal even froze a $35k donation for cancer treatment and in another case forced Regretsy to refund all their donations.
  - kalleboo 13y ago
    PayPal terms of service strictly requires any kind of charity donation campaign to be approved by them in advance. Anyone who has their unapproved donation drive frozen by PayPal kind of deserve what they get.
    - andyhmltn 13y ago
      I don't agree with that. They kind of emphasise that they want people using donation buttons and unless you are going into the ToS and looking (which I'm sure 99.99% of people don't) you wouldn't know that.
- zokier 13y ago
  The more I hear these kind of stories the less insane PayPal actually becomes in my eyes. It's just that their service is very specific and tailored to eBay usage.
andyhmltn 13y ago
They will only release the funds when version 1.0 ships? Does PayPal not understand that it costs money to create products? That's the entire reasoning behind crowdfunding! 'Well you see this money you said you needed to make version 1.0 of the product? Well you can have it after you've finished'
- zokier 13y ago
  > That's the entire reasoning behind crowdfunding! They're not a crowdfunding service, they are a escrow service. The whole point of escrowing is that the service keeps the money safe until the transaction is completed (ie the buyer gets what she was buying).
  - 300bps 13y ago
    I was under the impression that PayPal was a payment service. Party A uses it to send money to Party B and as long as no laws are broken, PayPal keeps its nose out of other people's business. What makes you think PayPal is an escrow service akin to escrow.com?
    - tinco 13y ago
      It is an escrow service because it allows the buyer to reverse the transaction.
      - Karunamon 13y ago
        It wouldn't kill paypal to have non-reversible transactions as long as this is made clear to the user.
        andyhmltn 13y ago
        Having dealt with a lot of chargebacks (none legitimate) people that like to chargeback seem to just say that someone unauthorised gained access to their account and they never meant to make that payment so they can just turn around and say 'as I didn't make the payment I didn't agree to that' It would then make it super easy for someone to hack a PP account and buy loads of stuff with 'non-reversible' transactions.
GoldfishCRM 13y ago
Hmm.. This does not sound good. Hope it will resolve it self. Maybe a founder to founder call is in place.
zokier 13y ago
SURPRISE!
M4v3R 13y ago
This is not the first time Paypal did that [1] and it most certainly won't be the last time. That's one of the reasons Bitcoin was invented. I hope that events like this will drive its adoption as a safe alternative for crowd funding and online shopping. [1] http://www.gamesindustry.biz/articles/2013-04-23-skullgirls-funding-held-by-paypal http://www.gamesindustry.biz/articles/2013-04-23-skullgirls-... and probably there's more of this
- pyalot2 13y ago
  Bitcoin ftw. Sure, not everybody can contribute in bitcoin. But on balance, bitcoin beats paypal by a factor of infinity. Why infinity? Well, with bitcoin you could at least have some contributions, i.e. > 0. With paypal you get 0 contributions. (N>1)/0 = infinity.
  - tzs 13y ago
    > Sure, not everybody can contribute in bitcoin. Why would anyone WANT to contribute in Bitcoin? From a contributor point of view, Bitcoin leaves them massively vulnerable to fraud--it is almost as bad as mailing an envelope full of cash.
    - cliffu 13y ago
      They are crowdfunding a speculative application. That's already mailing envelopes of cash. Although the users read that they are funding development and not buying software, Paypal grabbed it all and said they're worried about fraud. Bitcoin lets the user assert that they trust the recipient. Or they could trust a third party escrow recipient. There's no payment processor to restrict who a crowdfunder wishes to trust.
      - the_mitsuhiko 13y ago
        People that crowdfund often do not trust the project. PayPal probably flagged them because of cancellations.
  - 13y ago
GeorgeOrr 13y ago
Paypal doesn't understand that it isn't their money. Every contributor to Mailpile has just had their funds stolen by what was supposed to be a middleman.
- paul_f 13y ago
  Actually it is their money. Paypal is taking all of the risk in the transaction. If Mailpile fails to deliver, Paypal is on the hook. I see no problem with what they did, maybe this should have been communicated better.
amirmc 13y ago
> "... unless Mailpile provides PayPal with a detailed budgetary breakdown of how we plan to use the donations from our crowd funding campaign they will not release the block on my account for 1 year until we have shipped a 1.0 version of our product." I'm a little confused by this. What crowd-sourced funds is PayPal withholding, as I thought that went via IndieGoGo? (answer: IndieGoGo uses PayPal) What on earth does PayPal care about the financial planning of the recipient of the funds? This doesn't seem like it has anything to do with fraud detection.
- HerraBRE 13y ago
  IndieGoGo offers PayPal as an option. Many people prefer it, for various reasons. The funds donated via. credit card directly on IndieGoGo are still available to us.
  - tinco 13y ago
    Maybe you can show Paypal this, demonstrating you are carrying a large share of the risk as well. It's all risk containment for them. I'm a bit surprised that you would write such a confused blog post about the freeze, isn't it common knowledge that this happens with all Paypal accounts that do not deal in (existing) physical things?
    - acjohnson55 13y ago
      I, for one, had no idea
- the_mitsuhiko 13y ago
  > What on earth does PayPal care about the financial planning of the recipient of the funds? This doesn't seem like it has anything to do with fraud detection. Because PayPal provides users with the option to ask for refund which can be very expensive for them. If they deem the risk is too high they won't do business with you.
  - ollysb 13y ago
kvanderd 13y ago
I am sorry this happened to you. As a consumer I used to love Paypal, buy anything with one click. After using them as a business owner for online transactions I absolutely hate them. I won't go into my situation but the horror stories are endless: http://www.ripoffreport.com/reports/directory/paypal-inc http://www.ripoffreport.com/reports/directory/paypal-inc http://www.paypalsucks.com/ http://www.paypalsucks.com/ As a developer I won't use them anymore. I use Stripe now.
adamnemecek 13y ago
I've always wondered why this policy is in place. Is it just to screw people over or is there some legitimate use? Are they trying to prevent money laundering?
- danbmil99 13y ago
  I think they do have to contend with legitimate fraud, and their automated systems simply can't deal with a true FOSS project where the people donating know precisely what they're getting into, and the developers are obviously not some gang from Nigeria
_ak 13y ago
...and that is why you don't use PayPal, no matter how loud people scream that they want to use PayPal. Seriously, PayPal has screwed over so many individuals, businesses and projects in the past, the obvious conclusion is that PayPal isn't an option when you run a small business (esp. IT/software-related) or a crowdfunding campaign.
8ig8 13y ago
I assume this is to protect against chargebacks. If Mailpile were to empty their PayPal account and then buyers start requesting refunds for non-delivery of the described product, PayPal would be left holding the bag.
- nwh 13y ago
  Well not exactly. Recently I sold a bunch of hardware on eBay. Took photos of it being packaged, photos of it at the post office, added express shipping and a tracking number. The tracking number says delivered, so I withdrew the funds back to my bank account. Next thing I know, PayPal debited my account for the full amount because the buyer filed a non-delivered complaint. End story is, PayPal doesn't leave themselves with no options for recourse. (I'm still fighting that one)
  - 8ig8 13y ago
    In Mailpile's case, there must be a higher risk that their linked account doesn't have $100,000 for PayPal to back out. The same could be said for your situation, but I'm assuming the liability is lower due to the amount. Edit: That's not quite right since $100,000 represents a collective amount, not individual buyers demanding a refund.
    - nwh 13y ago
      I certainly didn't have $250 in that account, which of course added a $50 overdraft fee. One would assume that they didn't spend all their money at once, so paypal would be able to suck back at least some of it.
whyleyc 13y ago
PayPal is fine for a certain class of limited transactions - usually when they involve selling physical or digital products which actually exist and can be delivered today. Rightly or wrongly though they have a very[1] long[2] history[3] of freezing the accounts of projects they deem to be remotely 'risky' to them. By definition this would seem to include almost any crowdfunded project where an actual product or service which people are paying for does not yet exist. Given how well documented this is I can't help but wonder why a company like IndieGoGo would touch PayPal with a bargepole - their interests seem diametrically opposed ! IndieGoGo should be protecting their users by disabling PayPal as a payment option for all projects. [1] http://techcrunch.com/2011/12/06/paypal-account-freeze/ http://techcrunch.com/2011/12/06/paypal-account-freeze/ [2] http://www.holdtheline.com/threads/paypal-freezes-funds-from-skullgirls-crowdfunding-drive.5309/ http://www.holdtheline.com/threads/paypal-freezes-funds-from... [3] http://www.siliconbeat.com/2013/08/16/paypal-freezes-then-returns-money-for-glassup-campaign/ http://www.siliconbeat.com/2013/08/16/paypal-freezes-then-re...
kalleboo 13y ago
> They just don't want to, and we cannot help but wonder why. > Crowd funding is an adventure. I don't think PayPal are as enthusiastic in joining you in an "adventure" as you think. Especially if that adventure includes credit card chargebacks.
- reustle 13y ago
  Sounds like an opportunity to create a crowdfunding site that only accepts cash in the mail. But then, I'm sure you open up a whole new can of worms.
  - kalleboo 13y ago
    The problem there is getting people off their asses to actually do it. One-click Paypal login has a very low barrier to purchase.
  - rmc 13y ago
    Physically processing that would be too expensive. The crowdfunding site would have to take a massive percetage/flat fee.
devx 13y ago
I see that nothing has changed, even with the new CEO that promised us Paypal would have more reasonable policies in the future.
ycombinatorcom 13y ago
Mailpile is about encrypted email that NSA may not be able to access. Mailpile also referred to Edward Snowden in their indiegogo campaign. Mailpile also accepts bitcoin payments. Do you need anymore reasons to why this happened ???
- Kiro 13y ago
  Get real.
  - sudomal 13y ago
    It's not without precedent to see payment systems leaned on to disable their clients. This is a shiny new webmail client with a focus on encryption, but these shady groups probably aren't attacking projects this early in their life... probably.
    - DennisP 13y ago
      True, and given the amount of economic and legal pressure the government has proven itself willing to apply to preserve its surveillance capabilities, I'm not sure why people think it's out of the question in this case. We haven't seen it yet for early-stage projects, but this one's gotten a fair amount of press and donations. It may seem more likely that PayPal froze the account due to discomfort with crowdfunding, but the question then is how many other campaigns have they done this with. Since Indiegogo still uses them, it seems the answer must be "not many."
- ahknight 13y ago
  Shouldn't you be in class?
crocowhile 13y ago
You need to get Indiegogo involved and IGG need to take serious measures, such as threatening to completely disable the paypal option from all their future projects.
deleted 13y ago
[deleted]
- mootothemax 13y ago
  I added a "donate" button to a free to use website I run. After its first use, PayPal proceeded to freeze my account because I "recently declared your organisation to be non-profit or started receiving donations". I was very unimpressed, mostly because there was absolutely no indication that adding a "donate" button would do this The first Google result for "paypal donate button" gives this page: https://www.paypal.com/cgi-bin/webscr?cmd=_donate-intro-outside https://www.paypal.com/cgi-bin/webscr?cmd=_donate-intro-outs... It clearly states: This button is intended for fundraising. If you are not raising money for a cause, please choose another option. Nonprofits must verify their status to withdraw donations they receive I think it's unfair to blame a company for enforcing policies which they're completely open about, especially when it's a policy you could read after mere seconds of research.
  - jessaustin 13y ago
    Yeah when I put together a donation site for a small (not-501(c)(3)) org some years ago, I was tempted to use donations but while reading the docs realized I just wanted payments. That site still operates, although thankfully I'm no longer involved, because PayPal still makes me nervous.
mootothemax 13y ago
They just don't want to, and we cannot help but wonder why. The risk of complaints, refunds, and chargebacks for non-delivery would be my guess. "Please provide an itemized budget and your development goal dates for your project" This puts us in an incredibly uncomfortable position... ...of having a roadmap for your product's development. It's really not unreasonable, and if you don't have even a vague idea right now, that's a big warning sign. ... we do not feel that it's remotely in their jurisdiction to ask for a detailed budget of our business Which is unfortunate, as PayPal's business boils down to risk management, and they're asking you to reduce their risk.
- HerraBRE 13y ago
  Note that they had previously stated that they wanted to release the funds as slowly as possible. Asking us to provide a detailed budget is basically asking us to justify that and give them a timetable so they can withhold the maximum amount of cash for the maximum amount of time.
  - mootothemax 13y ago
    Note that they had previously stated that they wanted to release the funds as slowly as possible. Asking us to provide a detailed budget is basically asking us to justify that None of this contradicts my point about mitigating risk, nor that it's a Very Good Idea to have even the most basic of development roadmaps.
    - HerraBRE 13y ago
      Sure, but we have no reason to give those details to PayPal, and very good reasons not to. Edit: Delaying payments by months is not acceptable or reasonable. There are tax implications (we have to deal with multiple jurisdictions) and opportunity costs. Also, this very obviously goes against the wishes of our community of backers - they are supporting a free software development project, not buying a product.
      - mootothemax 13y ago
ollysb 13y ago
The problem here is that crowd-funding is a risky business and as things stand paypal has to shoulder that risk. What we need is a type of transaction where the payer/crowdfunder assumes the risk, i.e. chargebacks are not allowed.
- emiliobumachar 13y ago
  Textbook Bitcoin.
  - justysebitcoin 13y ago
    Yes!
- kalleboo 13y ago
  Exactly. It's turned out that the only way to charge for things online is using credit cards, so everyone is exposed to the chargeback risk.
downandout 13y ago
I don't know why, in 2013, people are surprised when they use PayPal and wind up without access to the money for months or years. Paypal apologists will say that this is relatively rare. Even if that is true, since the criteria they use to take these actions are often beyond the control of merchants, using PayPal is an unacceptable risk for any business that doesn't have at least 6 months of working capital. Always avoid PayPal if you need access to the money. Even if you feel that your business falls squarely within PayPal's AUP, always have a backup implementation with an alternative payment provider coded and ready to go (I recommend using Stripe and skipping PayPal altogether). You don't want to lose new sales on top of the money PayPal decides to hold indefinitely.
- grandalf 13y ago
  I've seen PayPal nearly put several small businesses out of business. There are some things that cause PayPal to just freeze an account, and it's next to impossible to speak to a human or to otherwise get the situation resolved. Pretty much the only threat to Stripe's eventual world domination would be PayPal getting its act together.
  - ig1 13y ago
    Most of Paypal's competitors weren't wiped out by Paypal being good, they were wiped out because they weren't as good as handling risk and fraud as Paypal. They got wiped out by criminals. Paypal is risk averse, which means you shouldn't use them for cases where you're taking a large amount of money up front and not delivering in the near future (i.e events, crowd-funding), or alternatively get pre-approval from Paypal. I've no idea what the current fraud level against Stripe is, but as they become more mainstream they're going to need to employ more anti-fraud and anti-risk measures as their exposure increases.
    - pc 13y ago
      > I've no idea what the current fraud level against Stripe is, but as they become more mainstream they're going to need to employ more anti-fraud and anti-risk measures as their exposure increases. I'm one of Stripe's cofounders. For what it's worth -- we already process billions of dollars a year. (More than PayPal when it was acquired.) There'll always be more we can do on the fraud/risk side, but we're already operating at a scale that requires a decent amount of sophistication.
bowlofpetunias 13y ago
People should start to understand that crowdfunding is not a trivial business from a legal and regulatory perspective. Yes, PayPal sucks, but you can run into this crap with any bank or payment service provider you don't have clear and direct business dealings with, and who you haven't informed upfront about what you're up to. Also, it's just plain lazy and irresponsible of IndieGogo to pay out via PayPal, at least not without big fat warning signs. Of all the options available, this is pretty much the worst. It's very naive to think that you can just accept money in exchange for unverifiable promises and not set off all kinds of alarm bells. Expect frozen assets to start to happen more and more often with crowdfunding, and not just at PayPal.
- kalleboo 13y ago
  I'm surprised PayPal still haven't taken a clear stance against crowdfunding like Amazon Payments have. That's part of the problem - it's really vague as to what situations PayPal will intervene in.
  - deleted 13y ago
    [deleted]
  - dpcx 13y ago
    That's funny, because Amazon Payments is exactly what crowdfunding site Kickstarter uses[0] to pay out to projects. [0]: http://www.kickstarter.com/help/amazon http://www.kickstarter.com/help/amazon
    - yebyen 13y ago
      I think that Kickstarter has their shit together, and the risk of a chargeback from Kickstarter to [project leader] is relatively low, compared to the risk of a project funded directly through Amazon Payments. I don't know how indiegogo works, but in the case of Kickstarter, I would assume that Kickstarter is collecting the payments, arbiter of refunds in the case a goal is not met, and does not have access to the money in the interim. Then Kickstarter uses Amazon Payments to disburse the funds to project lead? I am uneducated and did not contribute to the fund, so I don't really know how it works. Can you enlighten?
dcc1 13y ago
That's Shitpal for you
zamalek 13y ago
It's not the first time I have heard about them freezing funds - the last time was a few years back. From what I remember they were worried that the customers would ask for their money back if the product wasn't completed (explaining why they want to see a budget). This has nothing to do with fraud. They are allowed to do whatever they want with your money because they are not a bank. It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here). Either way, I would raise a massive stink if they don't buckle - I see you have a WIRED article, maybe approach them about writing about this encounter with PayPal. That's some pretty bad publicity right there. You may also be able to demand interest if they do continue to illegally with-hold the funds for that long (again, they are not a bank, but that means that this time they are not protected by those very same laws).
- DanBC 13y ago
  > It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here). I wish I could agree, but the angry rants on a few Kickstarter projects show that many people see it as a "shop for things that haven't been built yet", rather than "give us some money, and we'll try to build these products, and if we do manage to build them you'll get one, but we could fail".
stevoski 13y ago
And...another group of people new to running a business find that the business side of things can be challenging and time-consuming.
contextual 13y ago
As I read this post, I felt a brief rush of anxiety wondering if I backed this project. I hoped not. These guys come off as rather flippant with other people's money.
mosselman 13y ago
So we keep reading this kind of thing on Paypal. Are there any viable alternatives for consumers? As a company you could use Stripe or Paymill (for Europe), but as a consumer the only alternative is to pull out a credit card when I buy games on Steam. I don't want to do this, I want a login for a payment provider that is coupled to my bank account. I don't want to walk around with my credit card as it is too unsafe (something that Americans probably don't understand).
paulgerhardt 13y ago
Part of the reason we open-sourced Selfstarter was to prevent situations like this happening to other companies. With Selfstarter and by extension Crowdtilt's Crowdhoster [1] if you have a problem like this, it would merely be a setback rather than a crisis. You manage your relationship with your customers, not someone else. If your payment processor gives you trouble, have your customers re-auth with a friendlier provider like Stripe, WePay or Amazon. If nothing else, even having the option to do so gives you more leverage should you find yourself in this position. If you need further convincing about the benefits of self-hosting your crowdfunding campaign, please see this earlier comment: https://news.ycombinator.com/item?id=6261442 https://news.ycombinator.com/item?id=6261442 [1] http://www.crowdhoster.com/ http://www.crowdhoster.com/
eksith 13y ago
Two things people need to keep in mind when using PayPal. 1) The company functions as an uninsured bank while essentially skipping the label thereby giving itself a legal loophole to function as it pleases. However, unlike a bank, you can't get to an actual human being in a timely manner unless you're dealing with hundreds of thousands of dollars or even millions. You're simply not important enough and PayPal is big enough that none of your complaints will really make a dent. 2) PayPal puts a value on risk. Your perception of this risk may be markedly different from PayPal's, however it is still there and if you trip over that threshold, you will be shut down with extreme prejudice. Projects like Mailpile function in a different world than even digital goods of a few years ago. You're not really donating for a product, but the expectation of a service which will, hopefully, come to fruition. The risk threshold set by PayPal is still under the older digital goods model which is an ill fit for Mailpile to begin with. Those two aren't the only reasons why no one should use PayPal, but keep in mind that nothing you do, show or even consider reasonable matters to them as it's their assessment that ultimately holds sway. You're dealing with a banking megalith with an equivalent responsiveness. Do not use PayPal.
matznerd 13y ago
Avoid Paypal as often as you can, simple as that. I am forced to use them for certain transactions, but anytime I can avoid them I do. I hate that they force me to verify my account, they force you to use Paypal credit (if you have it) instead of a CC, etc. I really don't like their one-sided policies...
- TazeTSchnitzel 13y ago
  >Force you to use Paypal credit (if you have it) instead of a CC What's so bad about that?
  - matznerd 13y ago
    Sometimes I receive payment for one task and I need to pay for a service or product with another credit card. Say I have $1500 paypal credit from one of my businesses, and want to pay a $500 charge from a certain credit card. I am not able to do that without first withdrawing the money. It's beyond annoying, just let me pay with the funding source I want.
timrogers 13y ago
I work at GoCardless.com, a UK-based payments startup (YC S11), and thus I have a above-average insight into these kinds of issues from my day-to-day work. From the point of view of fraud protection and risk management, I can see why PayPal take this kind of unilateral action. Payments providers are always at high risk, and since they deal with and indemnify other financial firms further up the chain, they're the ones taking the risk. Even when you're charging relatively high fees as PayPal does, one case of fraud or even something as simple as a project that doesn't materialise (not that I think that'll happen with Mailpile!) can eat up tonnes of your revenue and make your business unviable. As such, GoCardless sometimes has to make decisions that account holders won't like. However, the difference between us (as well as, I believe, other providers like Stripe) and PayPal is that we will be (a) reachable and (b) reasonable. For me, PayPal's failing is in the lack of customer engagement on these issues. Every story like this shows PayPal as cagey, unhelpful and unwilling to have a discussion or reconsider at all. Everyone can, to a degree, understand why PayPal has to make unpopular decisions to protect itself from unacceptable risk (as all businesses will have to do in various ways), but their approach and manner in doing so is what is unacceptable.
- deleted 13y ago
  [deleted]
jusben1369 13y ago
What strikes me as really disappointing here is that the person has no idea why PayPal has frozen their account. It's surprising to me that they don't understand the inherent risks to PayPal from a kickstarter program (how dare they ask me for my business plan?!). In this post at least it seems like they just think PayPal doesn't like them and wants to hold their money for a long time. I guess they should have done more reading up around the financial side of a kickstarter. And PayPal is clearly at fault that this person is so confused and upset too. How hard is it for them to say "In the past, we have seen crowd funding sites/services that never delivered anything. That resulted in a lot of unhappy end users going to their credit card companies and initiating a chargeback which we're on the hook to pay. As you can see, if you took the money from your account and disappeared we'd be on the hook for that entire $X. That's why it's important we understand more about what you're up to" It would be ideal if this happened pre account/money collecting but I don't know all the details around that (Perhaps this is a long term account used for "normal" credit card processing who then decided, without informing PayPal, to run a Kickstarter. Who knows)
- jtbigwoo 13y ago
  >> How hard is it for them to say "In the past, we have seen crowd funding sites/services that never delivered anything. That resulted in a lot of unhappy end users going to their credit card companies and initiating a chargeback which we're on the hook to pay. As you can see, if you took the money from your account and disappeared we'd be on the hook for that entire $X. That's why it's important we understand more about what you're up to" The reason they don't is probably experience. If you're delivering bad news, don't mess around and don't over-explain. Every extra sentence in your communication is just a potential complication. Tell the target the problem simply, including details that directly relate to their conduct, and tell them how to fix it to your satisfaction. Don't tell them the history of this type of problem. You do this because the target is going to be upset about it and they're going to want to argue. The more you communicate, the more points they have to argue. In your description, I see at least four more points to argue ("we're not like those guys that didn't deliver...our users are different...we're trustworthy people...you're only a percentage of our total funding so your risk really isn't that great..."). None of those points matter and none of them are going to change anything. Paypal has told them what's wrong and given them concrete steps to fix it. Anything more is just going to drag out the resolution of the problem from Paypal's perspective.
patio11 13y ago
Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sales? Because, if the business fails (as new businesses often do), customers will file chargebacks. Their banks will hear "Internet merchant did not deliver as promised" and sustain the chargeback automatically. Paypal will lose that argument with the bank, 99.999% of the time, and have to seek restitution from the merchant. Paypal has to do underwriting -- basically, guessing at probable risks and likelihood of partial repayment -- for new merchant accounts. What percentage of sales are at risk of chargeback in a pre-sales business? A Very High Percentage (TM). What is the probable chance of failure of a new business in developing a new product? Fairly high. Given product failure, what assets will be available to Paypal (in the Paypal account or the linked bank account) for automatic recovery from the failed business? Very Little (TM). What is Paypal's margin on this business? A fraction of a percent. Now we break out the Hadoop cluster and use several billions of dollars of transactional data to construct a model of what the expected loss is, expected recovery given loss, and expected margin in event of non-loss is. This puts us in an incredibly uncomfortable position as we do not feel that it's remotely in their jurisdiction to ask for a detailed budget of our business, any more than it is within our right to ask for theirs. This communication is incredibly useful from Paypal's perspective among multiple axes: 1) It signals very strongly "We are not only unwilling to comply with the table stakes of every underwriting process for businesses everywhere, we are so inexperienced at business as to be unaware that this is table stakes, and accordingly you should dramatically revise upwards your estimate of our risk of failure." 2) It provides Paypal a simple, face-saving out for declining this business without having to say, in so many words, that "You seem, oh, 93% likely to ship this year. You get an A! This means, however, you are 7% likely to lose all the money, and we only make .9% margins, so this is going to be a No. We get that you don't like this. We don't like having to decline hundreds of dollars of revenue either, but we have the experience of losing hundreds of millions to fraud and know that some revenue just isn't worth the risk. We respect that you might not agree with this, but don't feel the need to spend additional resources paying for our computer programmers, underwriters, lawyers, and accountants to give you an expensive education in the realities of e-commerce on our nickel." Let's talk about the difference between Paypal and Indiegogo: 1) You pay Paypal ~3% when their costs are probably approaching ~2%. Indiegogo would charge ~7% for the same thing. One of the luxuries when selling something which is five times as lucrative is that you can self-insure against project failure. 2) Indiegogo believes it has a different business model than Paypal and that they have a uniquely better understanding of the risks of crowdfunding, whereas Paypal has had their filters tuned by too many middle Americans selling Beanie Babies. 3) Paypal has lost hundreds of millions of VC money to fraud and Indiegogo hasn't. Paypal decisionmakers might at this point give Indiegogo the sort of look a school psychologist gives a C student with a drug habit who has just announced that they're taking a semester off to find themselves, man. They know which way this story is going to turn out, which is in its own special way as bad as not knowing how the story is going to turn out. Are the risks larger because we are successful? Ask a simple question, get a simple answer: yes! Paypal loses more on a $1,000,000-in-transactions account which goes bad than a $1,000-in-transactions account which goes bad, clearly. You might wonder "Well are we more risky than the same aggregate volume spread over N accounts?", in which case the answer is available to Paypal's Hadoop cluster but plausibly "Yes, with a p value which would make a statistician weep." Accounts which go 0-to-60 in processed transactions are hugely disproportionately likely to be outright fraud (Paypal has had many, many, many encounters with carders smart enough to have invented the suborn-a-botnet and make-a-lot-of-small-donations attack prior to having seen it on Breaking Bad). Additionally, it is quite plausible that Paypal could demonstrate that success is a curse to new businesses and most which blow up proceed to, well, blow up. (Which they would, of course, not love to disclose publicly.) This dynamic is not unique to pre-sales or crowdfunding. It also explains Paypal's active hostility to many other business models, including money services businesses, third-party payment aggregators, and travel agents. (Most people don't immediately associate travel agents with having a lot of payment industry problems, but they do: they make lots of big-ticket sales but have low working capital, and if a cruise gets canceled or a hotel goes bankrupt or any of the standard vicissitudes of the industry causes them to eat a bunch of chargebacks all at once, they go bankrupt and their payment processor is on the hook for hundreds of thousands or millions of dollars as that bankruptcy causes cascading failure to deliver promised goods or services.)
transfire 13y ago
There is very simple solution to all this!!!!!! PayPal should have an "AT YOUR OWN RISK" payment option. Pre-sale vendors would be required by the terms of use to use this payment option instead of the normal one unless they first get a pre-sale waiver from PayPal. PayPal can charge an application fee for that process. All done.
- smackfu 13y ago
  The problem is that chargebacks and disputes are happening at the level above Paypal (at the banks), and Paypal is just the merchant. And there is no way for merchants to make a sale and say "no chargebacks."
magoon 13y ago
Some things never change - even when a new executive promises.
nhangen 13y ago
This is exactly why our company stopped focusing on our Paypal integration and started focusing on other gateways, such as Stripe and WePay. We had built a really great Braintree gateway, but they to came out with a policy against crowdfunding. As far as I can tell, you can still get through and/or avoid messes like these by communicating with the gateway up front in order to get permission. Robert Space Industries did this with Amazon and Paypal before launching. They were forced to provide much of this documentation, but in the end, it helped them avoid any major hiccups. Of course, IndieGoGo should be working with merchants to help them through this. If they are going to be the intermediary between the crowd and the company, they should do the same when dealing with payments. Sadly, all of the major crowdfunding platforms lack in this regard. If you're thinking about crowdfunding and are nervous about being shut down, I recommend you run either as donations or pre-orders. In the case of the latter, you are best not taking funds until the goal is met or you've reached a certain development milestone. I do think that this sucks for crowdfunding in general, but perhaps it will curtail the money grab that has been in place for some time. And of course, if you want to have as many options as possible, check out http://IgnitionDeck.com http://IgnitionDeck.com. A WordPress install and you can have your choice of gateways. Good luck to the Mailpile guys. I recommend providing this information. It will be good to have in the event that an investor knocks on the door.
jamestomasino 13y ago
Wow, I'm really surprised by the amount of snark on this thread aimed at mailpile. They are following IndieGoGo's standard process. For PayPal to take exception with them and single out their funds is ridiculous. If PayPal wants to start requiring IndieGoGo campaigns to submit business plans, they should work that out with the site, not an individual campaign, and certainly not after the whole thing is funded. This is not Mailpile's fault for following procedure.
- gopher1 13y ago
  Yes, it's odd how everyone is piling onto Mailpile for something that PayPal doesn't do with other IndieGoGo campaigns. If crowdfunding is so risky, why is PayPal totally fine with it for every other campaign out there? Yes they make promises and there's no guarantee they'll deliver. That's the whole point of crowdfunding, it's like that for every other campaign. Why is PayPal singling out Mailpile?
marijn 13y ago
I feel kind of bad about the fact that they initially didn't enable paypal donations, but enabled them a few hours after I suggested they do. I might be responsible. My own smaller (16k) indiegogo campaign went completely over paypal without a hitch [1]. Probably the fact that my paypal account has been seeing relatively large transaction volumes for years also helped prevent the alarm algorithm from triggering on it. [1]: http://www.indiegogo.com/projects/tern-intelligent-javascript-editing http://www.indiegogo.com/projects/tern-intelligent-javascrip...
Uchikoma 13y ago
Or you could read the terms of the business relationship with PayPal: Am I allowed to presell? Yes, you are allowed to presell items as long as you follow these guidelines. Off eBay presale requirements If you sell items in an online store (not eBay), you must guarantee delivery within 20 days from the date of purchase and make sure that the customer knows they are buying a presale item. [...] If you are selling goods or services in an online store (not eBay), you may be allowed to presell items but we may hold your money in a reserve account or limit what you can do with your account to reduce the higher risks associated with presale items. Or as the ruder ones of us said in the 90s on Usenet: RTFM. https://www.paypal-businesscenter.com/content/presale-policy-and-reserves https://www.paypal-businesscenter.com/content/presale-policy...
rip747 13y ago
this doesn't surprise me in the least. reading the comments, this thread is turning into a paypal bashing which it shouldn't. what happened is not paypal's fault or some insider attempt at stopping the project from happening as some laughable comments have suggested. paypal's top priority is to their customers, not the merchant. if you look at this from their perspective this is the right move as what would happen if the project just took the money and never delivered? asking them for a detailed list of `itemized budget and your development goal dates for your project` is something that any smart investor would ask for and they should have had this done already so i don't see why this is cause for concern.
hardwaresofton 13y ago
Shoulda taken bitcoins.
Uchikoma 13y ago
Paypal: If you presale we might freeze your account Merchant does presale Paypal freezes account Merchant: Why you did that?
- kalleboo 13y ago
  It's pretty ridiculous that IndieGogo allow PayPal for their campaigns when it's pretty much against the PayPal ToS.
devinmontgomery 13y ago
Anyone considering using PayPal as a seller should read Jessica Livingston's "Founders at Work" interview with Max Levchin. PayPal is an anti-fraud company that occasionally processes payments. It's appealing to customers and established merchants with slow, predictable growth and short lead times, but not for pre-orders. And I don't see them changing this - it's in their DNA. Kickstarter with Amazon Payments, in contrast and for better or worse, is the most pre-order friendly system imaginable. Tens of thousands to millions of dollars transferred in days with virtually no questions asked. The 14-day holding period they mention is only for first time projects.
andrechile 13y ago
seems like paypal CEO David Marcus is looking in to it. Whenever there is a high profile case like this that gets a lot of public attention he seems to get involved https://twitter.com/davidmarcus/status/375621484175060993 https://twitter.com/davidmarcus/status/375621484175060993
gregd 13y ago
Could it be that we've all missed the point entirely? Maybe, just maybe, Paypal was under duress from the Feds to cancel their Paypal account because they're afraid of what Mailpile would have accomplished?
dcuthbertson 13y ago
I wonder if Elon Musk cares at all that a service he created, one that made him incredibly wealthy, is so willfully abusive and corrupt. How about Pierre Omidyar or John Donahue? PayPal really needs to be investigated by federal governments, and put under strict oversight, regulations and controls.
duked 13y ago
It's funny at the same time paypal still let extorsion websites use its services: https://news.ycombinator.com/item?id=6328480 https://news.ycombinator.com/item?id=6328480
joshdance 13y ago
Don't use PayPal for pre-orders.
crucini 13y ago
> ... freedom to maintain your vision unbeholden to shareholders and 3rd parties. Aye, there's the rub. Many of us want that freedom, but it's rare. Powerful people are generally quite beholden to third parties. The president of the US can't do whatever he wants; neither can the CEO of Google. In order to make our dreams real, we must communicate them in common language to stakeholders, a process which may flatten them and drain their magic.
happywolf 13y ago
There is another angle to this: PayPal needs to make sure this money actually goes to a legitimate business, instead of some trick of money laundering. From PayPal's perspective, it has a hard time to differentiate this without details on what you claim you are going to do. If you have concern about PayPal knowing your plan and thus cause impact to your business plan, my thought will be if your business plan is so flimsy and fragile, how much confidence you are having? Same goes to if you have concerns of other people knowing and thus pilfering your ideas.
johnx123-up 13y ago
Can anybody explain... if using turnkey crowdfunding scripts like Agriya will help here? My previous company used Agriya and didn't face any issues from paypal. So just checking..
- wmf 13y ago
  No, nothing will help. If PayPal discovers that you are doing crowdfunding they will freeze your money forever. Some people got away with it because PayPal didn't notice them, but you can't predict that PayPal will not notice you in the future.
mcintyre1994 13y ago
I have to worry about how crowd-funding is going to continue to break records and change businesses when there's such a huge communication issue. If there is a risk of charge-backs for an undelivered product, which there clearly is based on Paypal's reaction, then people are clearly viewing them as pre-orders. That's obviously what it has become, but for crowd-funding to really be reasonable for companies like Paypal, failed projects have to leave backers out of pocket and nobody else. If crowd-funding is synonymous with pre-ordering a not yet available produce, I can't say I blame Paypal for wanting to keep out.
triplesec 13y ago
Paypal is well-known for this kind of behaviour. Search relevant terms through HN and various tech conferences have had issues with freezing and no warning and zero accountability and customer service.
nakedrobot2 13y ago
Sorry, Indiegogo - I will never use you for a crowdfunding campaign after seeing what Paypal does! I'll use Kickstarter, who uses Amazon Payments.
nakedrobot2 13y ago
Sorry, Indiegogo - I will never use you for a crowdfunding campaign after seeing what Paypal does! I'll use Kickstarter, who uses Amazon Payments.
gesman 13y ago
Paypal is unavoidable - there are just too much more money that can be made using Paypal because so many people use paypal and have positive balances at paypal and considering "paypal money" as "cheap money" - which makes them easier to spend to buy or to donate. Paypal is good when used for what it is good for - as a vessel to receive (and send) money easily. But no one ever said that Paypal is a great bank to keep money at. There are simple rules of the game to avoid disasters like that: The rules of using Paypal: transfer paypal balance to your bank account as soon as it reaches $500 or more. Once funds are transferred - transfer them to parallel bank account to keep them completely out of Paypal reach (as Paypal has full access to bank account connected to paypal account). That's it. Piling up cash at Paypal's account never been wise.
drivebyacct2 13y ago
Person who uses GoDaddy is shocked when they have domain/registrar issues. Person who knows to make backups but doesn't is shocked when they lose data and haven't made backups. Person who uses PayPal is "shocked" when their campaign funds are seized.
vermontdevil 13y ago
Apparently PayPal has reached out and unfroze the funds. http://arstechnica.com/business/2013/09/paypal-freezes-45000-of-mailpiles-crowdfunded-dollars/ http://arstechnica.com/business/2013/09/paypal-freezes-45000...
newobj 13y ago
How many horror stories do you have to hear until you don't use paypal and don't use anything that uses paypal?
DannyBee 13y ago
I believe the whole story and comments can be summed up as: 1. People want paypal to act as a big dumb money pipe from point A to point B 2. Paypal refuses to act as a big dumb money pipe from point A to point B when the risk is high that point A may want their money back, and paypal cannot shift the loss allocation to someone else. 3. Their risk mitigation strategy in the case of #2, while not atypical of the industry, upsets a lot of people who are not familiar with this type of thing occurring, and seems "unfair".
dpweb 13y ago
It's a complex question. Easy for Mailpile if they want to go to war about it. Start a new direct campaign somewhere else and tell their previous givers to request a charge-back. PP acting in its role in indemnifying buyers here, which is understandable, but it really isn't appropriate for them to pass judgement on MP business plans. Free market will sort this out anyway. IGG or givers will go to another platform if PP is seen as unreasonable. Few are going to go thru the trouble of a campaign if PP is constantly holding back the funds.
zodman 13y ago
son of bitches!
jgalt212 13y ago
It's amazing to me how revered the PayPal mafia is and continues to be despite all the detestation that continues to be heaped up PayPay, the company.

528 points by capgre 13y ago

andyhmltn 13y ago

Why do people still use PayPal? Their service is just absolutely insane.

DoubleMalt 13y ago
Because indiegogo forces you to do it more ore or less. Glad I didn't donate yet. If necessary I'll fly over and deliver it in person ;)
- HerraBRE 13y ago
  IndieGoGo actually support direct credit card donations, but a lot of people asked for PayPal as an option and we relented. So donating via. IGG actually works just fine - we have obviously disabled the PayPal option.
  - appleflaxen 13y ago
    Wait... really? Because when the ubuntu phone campaign happened, I wanted to buy one, and didn't purely because I couldn't figure out a way to do it without PayPal. Did I miss something on the page that would have let me pay without it? Oh well; too late now I guess.
    - gopher1 13y ago
      I was in the same boat as you with respect to the Ubuntu Edge, as it turns out each campaign can choose which payment services to use. Ubuntu chose to only enable PayPal.
- andyhmltn 13y ago
  Oh dear, that's not a good situation then!
webjames 13y ago
My sentiments exactly, if this were the first instance of this i would forgive them however it is not; I fail to see why paypal is used given it recent history. Ref: GlassUp Campaign - Indiegogo Diaspora's Funding Account Skullgirls DLC by developer Lab Zero - Indiegogo Paypal even froze a $35k donation for cancer treatment and in another case forced Regretsy to refund all their donations.
- kalleboo 13y ago
  PayPal terms of service strictly requires any kind of charity donation campaign to be approved by them in advance. Anyone who has their unapproved donation drive frozen by PayPal kind of deserve what they get.
  - andyhmltn 13y ago
    I don't agree with that. They kind of emphasise that they want people using donation buttons and unless you are going into the ToS and looking (which I'm sure 99.99% of people don't) you wouldn't know that.
zokier 13y ago
The more I hear these kind of stories the less insane PayPal actually becomes in my eyes. It's just that their service is very specific and tailored to eBay usage.

andyhmltn 13y ago

They will only release the funds when version 1.0 ships? Does PayPal not understand that it costs money to create products? That's the entire reasoning behind crowdfunding! 'Well you see this money you said you needed to make version 1.0 of the product? Well you can have it after you've finished'

zokier 13y ago
> That's the entire reasoning behind crowdfunding! They're not a crowdfunding service, they are a escrow service. The whole point of escrowing is that the service keeps the money safe until the transaction is completed (ie the buyer gets what she was buying).
- 300bps 13y ago
  I was under the impression that PayPal was a payment service. Party A uses it to send money to Party B and as long as no laws are broken, PayPal keeps its nose out of other people's business. What makes you think PayPal is an escrow service akin to escrow.com?
  - tinco 13y ago
    It is an escrow service because it allows the buyer to reverse the transaction.
    - Karunamon 13y ago
      It wouldn't kill paypal to have non-reversible transactions as long as this is made clear to the user.
      - andyhmltn 13y ago
        Having dealt with a lot of chargebacks (none legitimate) people that like to chargeback seem to just say that someone unauthorised gained access to their account and they never meant to make that payment so they can just turn around and say 'as I didn't make the payment I didn't agree to that' It would then make it super easy for someone to hack a PP account and buy loads of stuff with 'non-reversible' transactions.

GoldfishCRM 13y ago

Hmm.. This does not sound good. Hope it will resolve it self. Maybe a founder to founder call is in place.

zokier 13y ago

SURPRISE!

M4v3R 13y ago

This is not the first time Paypal did that [1] and it most certainly won't be the last time. That's one of the reasons Bitcoin was invented. I hope that events like this will drive its adoption as a safe alternative for crowd funding and online shopping. [1] http://www.gamesindustry.biz/articles/2013-04-23-skullgirls-funding-held-by-paypal http://www.gamesindustry.biz/articles/2013-04-23-skullgirls-... and probably there's more of this

pyalot2 13y ago
Bitcoin ftw. Sure, not everybody can contribute in bitcoin. But on balance, bitcoin beats paypal by a factor of infinity. Why infinity? Well, with bitcoin you could at least have some contributions, i.e. > 0. With paypal you get 0 contributions. (N>1)/0 = infinity.
- tzs 13y ago
  > Sure, not everybody can contribute in bitcoin. Why would anyone WANT to contribute in Bitcoin? From a contributor point of view, Bitcoin leaves them massively vulnerable to fraud--it is almost as bad as mailing an envelope full of cash.
  - cliffu 13y ago
    They are crowdfunding a speculative application. That's already mailing envelopes of cash. Although the users read that they are funding development and not buying software, Paypal grabbed it all and said they're worried about fraud. Bitcoin lets the user assert that they trust the recipient. Or they could trust a third party escrow recipient. There's no payment processor to restrict who a crowdfunder wishes to trust.
    - the_mitsuhiko 13y ago
      People that crowdfund often do not trust the project. PayPal probably flagged them because of cancellations.
- 13y ago

GeorgeOrr 13y ago

Paypal doesn't understand that it isn't their money. Every contributor to Mailpile has just had their funds stolen by what was supposed to be a middleman.

paul_f 13y ago
Actually it is their money. Paypal is taking all of the risk in the transaction. If Mailpile fails to deliver, Paypal is on the hook. I see no problem with what they did, maybe this should have been communicated better.

amirmc 13y ago

> "... unless Mailpile provides PayPal with a detailed budgetary breakdown of how we plan to use the donations from our crowd funding campaign they will not release the block on my account for 1 year until we have shipped a 1.0 version of our product." I'm a little confused by this. What crowd-sourced funds is PayPal withholding, as I thought that went via IndieGoGo? (answer: IndieGoGo uses PayPal) What on earth does PayPal care about the financial planning of the recipient of the funds? This doesn't seem like it has anything to do with fraud detection.

HerraBRE 13y ago
IndieGoGo offers PayPal as an option. Many people prefer it, for various reasons. The funds donated via. credit card directly on IndieGoGo are still available to us.
- tinco 13y ago
  Maybe you can show Paypal this, demonstrating you are carrying a large share of the risk as well. It's all risk containment for them. I'm a bit surprised that you would write such a confused blog post about the freeze, isn't it common knowledge that this happens with all Paypal accounts that do not deal in (existing) physical things?
  - acjohnson55 13y ago
    I, for one, had no idea
the_mitsuhiko 13y ago
> What on earth does PayPal care about the financial planning of the recipient of the funds? This doesn't seem like it has anything to do with fraud detection. Because PayPal provides users with the option to ask for refund which can be very expensive for them. If they deem the risk is too high they won't do business with you.
- ollysb 13y ago

kvanderd 13y ago

I am sorry this happened to you. As a consumer I used to love Paypal, buy anything with one click. After using them as a business owner for online transactions I absolutely hate them. I won't go into my situation but the horror stories are endless: http://www.ripoffreport.com/reports/directory/paypal-inc http://www.ripoffreport.com/reports/directory/paypal-inc http://www.paypalsucks.com/ http://www.paypalsucks.com/ As a developer I won't use them anymore. I use Stripe now.

adamnemecek 13y ago

I've always wondered why this policy is in place. Is it just to screw people over or is there some legitimate use? Are they trying to prevent money laundering?

danbmil99 13y ago
I think they do have to contend with legitimate fraud, and their automated systems simply can't deal with a true FOSS project where the people donating know precisely what they're getting into, and the developers are obviously not some gang from Nigeria

_ak 13y ago

...and that is why you don't use PayPal, no matter how loud people scream that they want to use PayPal. Seriously, PayPal has screwed over so many individuals, businesses and projects in the past, the obvious conclusion is that PayPal isn't an option when you run a small business (esp. IT/software-related) or a crowdfunding campaign.

8ig8 13y ago

I assume this is to protect against chargebacks. If Mailpile were to empty their PayPal account and then buyers start requesting refunds for non-delivery of the described product, PayPal would be left holding the bag.

nwh 13y ago
Well not exactly. Recently I sold a bunch of hardware on eBay. Took photos of it being packaged, photos of it at the post office, added express shipping and a tracking number. The tracking number says delivered, so I withdrew the funds back to my bank account. Next thing I know, PayPal debited my account for the full amount because the buyer filed a non-delivered complaint. End story is, PayPal doesn't leave themselves with no options for recourse. (I'm still fighting that one)
- 8ig8 13y ago
  In Mailpile's case, there must be a higher risk that their linked account doesn't have $100,000 for PayPal to back out. The same could be said for your situation, but I'm assuming the liability is lower due to the amount. Edit: That's not quite right since $100,000 represents a collective amount, not individual buyers demanding a refund.
  - nwh 13y ago
    I certainly didn't have $250 in that account, which of course added a $50 overdraft fee. One would assume that they didn't spend all their money at once, so paypal would be able to suck back at least some of it.

whyleyc 13y ago

PayPal is fine for a certain class of limited transactions - usually when they involve selling physical or digital products which actually exist and can be delivered today. Rightly or wrongly though they have a very[1] long[2] history[3] of freezing the accounts of projects they deem to be remotely 'risky' to them. By definition this would seem to include almost any crowdfunded project where an actual product or service which people are paying for does not yet exist. Given how well documented this is I can't help but wonder why a company like IndieGoGo would touch PayPal with a bargepole - their interests seem diametrically opposed ! IndieGoGo should be protecting their users by disabling PayPal as a payment option for all projects. [1] http://techcrunch.com/2011/12/06/paypal-account-freeze/ http://techcrunch.com/2011/12/06/paypal-account-freeze/ [2] http://www.holdtheline.com/threads/paypal-freezes-funds-from-skullgirls-crowdfunding-drive.5309/ http://www.holdtheline.com/threads/paypal-freezes-funds-from... [3] http://www.siliconbeat.com/2013/08/16/paypal-freezes-then-returns-money-for-glassup-campaign/ http://www.siliconbeat.com/2013/08/16/paypal-freezes-then-re...

kalleboo 13y ago

> They just don't want to, and we cannot help but wonder why. > Crowd funding is an adventure. I don't think PayPal are as enthusiastic in joining you in an "adventure" as you think. Especially if that adventure includes credit card chargebacks.

reustle 13y ago
Sounds like an opportunity to create a crowdfunding site that only accepts cash in the mail. But then, I'm sure you open up a whole new can of worms.
- kalleboo 13y ago
  The problem there is getting people off their asses to actually do it. One-click Paypal login has a very low barrier to purchase.
- rmc 13y ago
  Physically processing that would be too expensive. The crowdfunding site would have to take a massive percetage/flat fee.

devx 13y ago

I see that nothing has changed, even with the new CEO that promised us Paypal would have more reasonable policies in the future.

ycombinatorcom 13y ago

Mailpile is about encrypted email that NSA may not be able to access. Mailpile also referred to Edward Snowden in their indiegogo campaign. Mailpile also accepts bitcoin payments. Do you need anymore reasons to why this happened ???

Kiro 13y ago
Get real.
- sudomal 13y ago
  It's not without precedent to see payment systems leaned on to disable their clients. This is a shiny new webmail client with a focus on encryption, but these shady groups probably aren't attacking projects this early in their life... probably.
  - DennisP 13y ago
    True, and given the amount of economic and legal pressure the government has proven itself willing to apply to preserve its surveillance capabilities, I'm not sure why people think it's out of the question in this case. We haven't seen it yet for early-stage projects, but this one's gotten a fair amount of press and donations. It may seem more likely that PayPal froze the account due to discomfort with crowdfunding, but the question then is how many other campaigns have they done this with. Since Indiegogo still uses them, it seems the answer must be "not many."
ahknight 13y ago
Shouldn't you be in class?

crocowhile 13y ago

You need to get Indiegogo involved and IGG need to take serious measures, such as threatening to completely disable the paypal option from all their future projects.

deleted 13y ago

[deleted]

mootothemax 13y ago
I added a "donate" button to a free to use website I run. After its first use, PayPal proceeded to freeze my account because I "recently declared your organisation to be non-profit or started receiving donations". I was very unimpressed, mostly because there was absolutely no indication that adding a "donate" button would do this The first Google result for "paypal donate button" gives this page: https://www.paypal.com/cgi-bin/webscr?cmd=_donate-intro-outside https://www.paypal.com/cgi-bin/webscr?cmd=_donate-intro-outs... It clearly states: This button is intended for fundraising. If you are not raising money for a cause, please choose another option. Nonprofits must verify their status to withdraw donations they receive I think it's unfair to blame a company for enforcing policies which they're completely open about, especially when it's a policy you could read after mere seconds of research.
- jessaustin 13y ago
  Yeah when I put together a donation site for a small (not-501(c)(3)) org some years ago, I was tempted to use donations but while reading the docs realized I just wanted payments. That site still operates, although thankfully I'm no longer involved, because PayPal still makes me nervous.

mootothemax 13y ago

They just don't want to, and we cannot help but wonder why. The risk of complaints, refunds, and chargebacks for non-delivery would be my guess. "Please provide an itemized budget and your development goal dates for your project" This puts us in an incredibly uncomfortable position... ...of having a roadmap for your product's development. It's really not unreasonable, and if you don't have even a vague idea right now, that's a big warning sign. ... we do not feel that it's remotely in their jurisdiction to ask for a detailed budget of our business Which is unfortunate, as PayPal's business boils down to risk management, and they're asking you to reduce their risk.

HerraBRE 13y ago
Note that they had previously stated that they wanted to release the funds as slowly as possible. Asking us to provide a detailed budget is basically asking us to justify that and give them a timetable so they can withhold the maximum amount of cash for the maximum amount of time.
- mootothemax 13y ago
  Note that they had previously stated that they wanted to release the funds as slowly as possible. Asking us to provide a detailed budget is basically asking us to justify that None of this contradicts my point about mitigating risk, nor that it's a Very Good Idea to have even the most basic of development roadmaps.
  - HerraBRE 13y ago
    Sure, but we have no reason to give those details to PayPal, and very good reasons not to. Edit: Delaying payments by months is not acceptable or reasonable. There are tax implications (we have to deal with multiple jurisdictions) and opportunity costs. Also, this very obviously goes against the wishes of our community of backers - they are supporting a free software development project, not buying a product.
    - mootothemax 13y ago

ollysb 13y ago

The problem here is that crowd-funding is a risky business and as things stand paypal has to shoulder that risk. What we need is a type of transaction where the payer/crowdfunder assumes the risk, i.e. chargebacks are not allowed.

emiliobumachar 13y ago
Textbook Bitcoin.
- justysebitcoin 13y ago
  Yes!
kalleboo 13y ago
Exactly. It's turned out that the only way to charge for things online is using credit cards, so everyone is exposed to the chargeback risk.

downandout 13y ago

I don't know why, in 2013, people are surprised when they use PayPal and wind up without access to the money for months or years. Paypal apologists will say that this is relatively rare. Even if that is true, since the criteria they use to take these actions are often beyond the control of merchants, using PayPal is an unacceptable risk for any business that doesn't have at least 6 months of working capital. Always avoid PayPal if you need access to the money. Even if you feel that your business falls squarely within PayPal's AUP, always have a backup implementation with an alternative payment provider coded and ready to go (I recommend using Stripe and skipping PayPal altogether). You don't want to lose new sales on top of the money PayPal decides to hold indefinitely.

grandalf 13y ago
I've seen PayPal nearly put several small businesses out of business. There are some things that cause PayPal to just freeze an account, and it's next to impossible to speak to a human or to otherwise get the situation resolved. Pretty much the only threat to Stripe's eventual world domination would be PayPal getting its act together.
- ig1 13y ago
  Most of Paypal's competitors weren't wiped out by Paypal being good, they were wiped out because they weren't as good as handling risk and fraud as Paypal. They got wiped out by criminals. Paypal is risk averse, which means you shouldn't use them for cases where you're taking a large amount of money up front and not delivering in the near future (i.e events, crowd-funding), or alternatively get pre-approval from Paypal. I've no idea what the current fraud level against Stripe is, but as they become more mainstream they're going to need to employ more anti-fraud and anti-risk measures as their exposure increases.
  - pc 13y ago
    > I've no idea what the current fraud level against Stripe is, but as they become more mainstream they're going to need to employ more anti-fraud and anti-risk measures as their exposure increases. I'm one of Stripe's cofounders. For what it's worth -- we already process billions of dollars a year. (More than PayPal when it was acquired.) There'll always be more we can do on the fraud/risk side, but we're already operating at a scale that requires a decent amount of sophistication.

bowlofpetunias 13y ago

People should start to understand that crowdfunding is not a trivial business from a legal and regulatory perspective. Yes, PayPal sucks, but you can run into this crap with any bank or payment service provider you don't have clear and direct business dealings with, and who you haven't informed upfront about what you're up to. Also, it's just plain lazy and irresponsible of IndieGogo to pay out via PayPal, at least not without big fat warning signs. Of all the options available, this is pretty much the worst. It's very naive to think that you can just accept money in exchange for unverifiable promises and not set off all kinds of alarm bells. Expect frozen assets to start to happen more and more often with crowdfunding, and not just at PayPal.

kalleboo 13y ago
I'm surprised PayPal still haven't taken a clear stance against crowdfunding like Amazon Payments have. That's part of the problem - it's really vague as to what situations PayPal will intervene in.
- deleted 13y ago
  [deleted]
- dpcx 13y ago
  That's funny, because Amazon Payments is exactly what crowdfunding site Kickstarter uses[0] to pay out to projects. [0]: http://www.kickstarter.com/help/amazon http://www.kickstarter.com/help/amazon
  - yebyen 13y ago
    I think that Kickstarter has their shit together, and the risk of a chargeback from Kickstarter to [project leader] is relatively low, compared to the risk of a project funded directly through Amazon Payments. I don't know how indiegogo works, but in the case of Kickstarter, I would assume that Kickstarter is collecting the payments, arbiter of refunds in the case a goal is not met, and does not have access to the money in the interim. Then Kickstarter uses Amazon Payments to disburse the funds to project lead? I am uneducated and did not contribute to the fund, so I don't really know how it works. Can you enlighten?

dcc1 13y ago

That's Shitpal for you

zamalek 13y ago

It's not the first time I have heard about them freezing funds - the last time was a few years back. From what I remember they were worried that the customers would ask for their money back if the product wasn't completed (explaining why they want to see a budget). This has nothing to do with fraud. They are allowed to do whatever they want with your money because they are not a bank. It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here). Either way, I would raise a massive stink if they don't buckle - I see you have a WIRED article, maybe approach them about writing about this encounter with PayPal. That's some pretty bad publicity right there. You may also be able to demand interest if they do continue to illegally with-hold the funds for that long (again, they are not a bank, but that means that this time they are not protected by those very same laws).

DanBC 13y ago
> It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here). I wish I could agree, but the angry rants on a few Kickstarter projects show that many people see it as a "shop for things that haven't been built yet", rather than "give us some money, and we'll try to build these products, and if we do manage to build them you'll get one, but we could fail".

stevoski 13y ago

And...another group of people new to running a business find that the business side of things can be challenging and time-consuming.

contextual 13y ago

As I read this post, I felt a brief rush of anxiety wondering if I backed this project. I hoped not. These guys come off as rather flippant with other people's money.

mosselman 13y ago

So we keep reading this kind of thing on Paypal. Are there any viable alternatives for consumers? As a company you could use Stripe or Paymill (for Europe), but as a consumer the only alternative is to pull out a credit card when I buy games on Steam. I don't want to do this, I want a login for a payment provider that is coupled to my bank account. I don't want to walk around with my credit card as it is too unsafe (something that Americans probably don't understand).

paulgerhardt 13y ago

Part of the reason we open-sourced Selfstarter was to prevent situations like this happening to other companies. With Selfstarter and by extension Crowdtilt's Crowdhoster [1] if you have a problem like this, it would merely be a setback rather than a crisis. You manage your relationship with your customers, not someone else. If your payment processor gives you trouble, have your customers re-auth with a friendlier provider like Stripe, WePay or Amazon. If nothing else, even having the option to do so gives you more leverage should you find yourself in this position. If you need further convincing about the benefits of self-hosting your crowdfunding campaign, please see this earlier comment: https://news.ycombinator.com/item?id=6261442 https://news.ycombinator.com/item?id=6261442 [1] http://www.crowdhoster.com/ http://www.crowdhoster.com/

eksith 13y ago

Two things people need to keep in mind when using PayPal. 1) The company functions as an uninsured bank while essentially skipping the label thereby giving itself a legal loophole to function as it pleases. However, unlike a bank, you can't get to an actual human being in a timely manner unless you're dealing with hundreds of thousands of dollars or even millions. You're simply not important enough and PayPal is big enough that none of your complaints will really make a dent. 2) PayPal puts a value on risk. Your perception of this risk may be markedly different from PayPal's, however it is still there and if you trip over that threshold, you will be shut down with extreme prejudice. Projects like Mailpile function in a different world than even digital goods of a few years ago. You're not really donating for a product, but the expectation of a service which will, hopefully, come to fruition. The risk threshold set by PayPal is still under the older digital goods model which is an ill fit for Mailpile to begin with. Those two aren't the only reasons why no one should use PayPal, but keep in mind that nothing you do, show or even consider reasonable matters to them as it's their assessment that ultimately holds sway. You're dealing with a banking megalith with an equivalent responsiveness. Do not use PayPal.

matznerd 13y ago

Avoid Paypal as often as you can, simple as that. I am forced to use them for certain transactions, but anytime I can avoid them I do. I hate that they force me to verify my account, they force you to use Paypal credit (if you have it) instead of a CC, etc. I really don't like their one-sided policies...

TazeTSchnitzel 13y ago
>Force you to use Paypal credit (if you have it) instead of a CC What's so bad about that?
- matznerd 13y ago
  Sometimes I receive payment for one task and I need to pay for a service or product with another credit card. Say I have $1500 paypal credit from one of my businesses, and want to pay a $500 charge from a certain credit card. I am not able to do that without first withdrawing the money. It's beyond annoying, just let me pay with the funding source I want.

timrogers 13y ago

I work at GoCardless.com, a UK-based payments startup (YC S11), and thus I have a above-average insight into these kinds of issues from my day-to-day work. From the point of view of fraud protection and risk management, I can see why PayPal take this kind of unilateral action. Payments providers are always at high risk, and since they deal with and indemnify other financial firms further up the chain, they're the ones taking the risk. Even when you're charging relatively high fees as PayPal does, one case of fraud or even something as simple as a project that doesn't materialise (not that I think that'll happen with Mailpile!) can eat up tonnes of your revenue and make your business unviable. As such, GoCardless sometimes has to make decisions that account holders won't like. However, the difference between us (as well as, I believe, other providers like Stripe) and PayPal is that we will be (a) reachable and (b) reasonable. For me, PayPal's failing is in the lack of customer engagement on these issues. Every story like this shows PayPal as cagey, unhelpful and unwilling to have a discussion or reconsider at all. Everyone can, to a degree, understand why PayPal has to make unpopular decisions to protect itself from unacceptable risk (as all businesses will have to do in various ways), but their approach and manner in doing so is what is unacceptable.

deleted 13y ago
[deleted]

jusben1369 13y ago

What strikes me as really disappointing here is that the person has no idea why PayPal has frozen their account. It's surprising to me that they don't understand the inherent risks to PayPal from a kickstarter program (how dare they ask me for my business plan?!). In this post at least it seems like they just think PayPal doesn't like them and wants to hold their money for a long time. I guess they should have done more reading up around the financial side of a kickstarter. And PayPal is clearly at fault that this person is so confused and upset too. How hard is it for them to say "In the past, we have seen crowd funding sites/services that never delivered anything. That resulted in a lot of unhappy end users going to their credit card companies and initiating a chargeback which we're on the hook to pay. As you can see, if you took the money from your account and disappeared we'd be on the hook for that entire $X. That's why it's important we understand more about what you're up to" It would be ideal if this happened pre account/money collecting but I don't know all the details around that (Perhaps this is a long term account used for "normal" credit card processing who then decided, without informing PayPal, to run a Kickstarter. Who knows)

jtbigwoo 13y ago
>> How hard is it for them to say "In the past, we have seen crowd funding sites/services that never delivered anything. That resulted in a lot of unhappy end users going to their credit card companies and initiating a chargeback which we're on the hook to pay. As you can see, if you took the money from your account and disappeared we'd be on the hook for that entire $X. That's why it's important we understand more about what you're up to" The reason they don't is probably experience. If you're delivering bad news, don't mess around and don't over-explain. Every extra sentence in your communication is just a potential complication. Tell the target the problem simply, including details that directly relate to their conduct, and tell them how to fix it to your satisfaction. Don't tell them the history of this type of problem. You do this because the target is going to be upset about it and they're going to want to argue. The more you communicate, the more points they have to argue. In your description, I see at least four more points to argue ("we're not like those guys that didn't deliver...our users are different...we're trustworthy people...you're only a percentage of our total funding so your risk really isn't that great..."). None of those points matter and none of them are going to change anything. Paypal has told them what's wrong and given them concrete steps to fix it. Anything more is just going to drag out the resolution of the problem from Paypal's perspective.

patio11 13y ago

Indulge me in a flight of fancy in which we pretend, for the sake of argument, that a) Paypal is run not by Snidely Whiplash clones but b) by smart geeks working with thin margins in a highly regulated industry where c) customers are at risk essentially never, d) merchants eat 100% of the risk if they stay in business, and e) Paypal eats 100% of the risk if the merchant doesn't. Why is Paypal very skeptical of pre-sales? Because, if the business fails (as new businesses often do), customers will file chargebacks. Their banks will hear "Internet merchant did not deliver as promised" and sustain the chargeback automatically. Paypal will lose that argument with the bank, 99.999% of the time, and have to seek restitution from the merchant. Paypal has to do underwriting -- basically, guessing at probable risks and likelihood of partial repayment -- for new merchant accounts. What percentage of sales are at risk of chargeback in a pre-sales business? A Very High Percentage (TM). What is the probable chance of failure of a new business in developing a new product? Fairly high. Given product failure, what assets will be available to Paypal (in the Paypal account or the linked bank account) for automatic recovery from the failed business? Very Little (TM). What is Paypal's margin on this business? A fraction of a percent. Now we break out the Hadoop cluster and use several billions of dollars of transactional data to construct a model of what the expected loss is, expected recovery given loss, and expected margin in event of non-loss is. This puts us in an incredibly uncomfortable position as we do not feel that it's remotely in their jurisdiction to ask for a detailed budget of our business, any more than it is within our right to ask for theirs. This communication is incredibly useful from Paypal's perspective among multiple axes: 1) It signals very strongly "We are not only unwilling to comply with the table stakes of every underwriting process for businesses everywhere, we are so inexperienced at business as to be unaware that this is table stakes, and accordingly you should dramatically revise upwards your estimate of our risk of failure." 2) It provides Paypal a simple, face-saving out for declining this business without having to say, in so many words, that "You seem, oh, 93% likely to ship this year. You get an A! This means, however, you are 7% likely to lose all the money, and we only make .9% margins, so this is going to be a No. We get that you don't like this. We don't like having to decline hundreds of dollars of revenue either, but we have the experience of losing hundreds of millions to fraud and know that some revenue just isn't worth the risk. We respect that you might not agree with this, but don't feel the need to spend additional resources paying for our computer programmers, underwriters, lawyers, and accountants to give you an expensive education in the realities of e-commerce on our nickel." Let's talk about the difference between Paypal and Indiegogo: 1) You pay Paypal ~3% when their costs are probably approaching ~2%. Indiegogo would charge ~7% for the same thing. One of the luxuries when selling something which is five times as lucrative is that you can self-insure against project failure. 2) Indiegogo believes it has a different business model than Paypal and that they have a uniquely better understanding of the risks of crowdfunding, whereas Paypal has had their filters tuned by too many middle Americans selling Beanie Babies. 3) Paypal has lost hundreds of millions of VC money to fraud and Indiegogo hasn't. Paypal decisionmakers might at this point give Indiegogo the sort of look a school psychologist gives a C student with a drug habit who has just announced that they're taking a semester off to find themselves, man. They know which way this story is going to turn out, which is in its own special way as bad as not knowing how the story is going to turn out. Are the risks larger because we are successful? Ask a simple question, get a simple answer: yes! Paypal loses more on a $1,000,000-in-transactions account which goes bad than a $1,000-in-transactions account which goes bad, clearly. You might wonder "Well are we more risky than the same aggregate volume spread over N accounts?", in which case the answer is available to Paypal's Hadoop cluster but plausibly "Yes, with a p value which would make a statistician weep." Accounts which go 0-to-60 in processed transactions are hugely disproportionately likely to be outright fraud (Paypal has had many, many, many encounters with carders smart enough to have invented the suborn-a-botnet and make-a-lot-of-small-donations attack prior to having seen it on Breaking Bad). Additionally, it is quite plausible that Paypal could demonstrate that success is a curse to new businesses and most which blow up proceed to, well, blow up. (Which they would, of course, not love to disclose publicly.) This dynamic is not unique to pre-sales or crowdfunding. It also explains Paypal's active hostility to many other business models, including money services businesses, third-party payment aggregators, and travel agents. (Most people don't immediately associate travel agents with having a lot of payment industry problems, but they do: they make lots of big-ticket sales but have low working capital, and if a cruise gets canceled or a hotel goes bankrupt or any of the standard vicissitudes of the industry causes them to eat a bunch of chargebacks all at once, they go bankrupt and their payment processor is on the hook for hundreds of thousands or millions of dollars as that bankruptcy causes cascading failure to deliver promised goods or services.)

transfire 13y ago

There is very simple solution to all this!!!!!! PayPal should have an "AT YOUR OWN RISK" payment option. Pre-sale vendors would be required by the terms of use to use this payment option instead of the normal one unless they first get a pre-sale waiver from PayPal. PayPal can charge an application fee for that process. All done.

smackfu 13y ago
The problem is that chargebacks and disputes are happening at the level above Paypal (at the banks), and Paypal is just the merchant. And there is no way for merchants to make a sale and say "no chargebacks."

magoon 13y ago

Some things never change - even when a new executive promises.

nhangen 13y ago

This is exactly why our company stopped focusing on our Paypal integration and started focusing on other gateways, such as Stripe and WePay. We had built a really great Braintree gateway, but they to came out with a policy against crowdfunding. As far as I can tell, you can still get through and/or avoid messes like these by communicating with the gateway up front in order to get permission. Robert Space Industries did this with Amazon and Paypal before launching. They were forced to provide much of this documentation, but in the end, it helped them avoid any major hiccups. Of course, IndieGoGo should be working with merchants to help them through this. If they are going to be the intermediary between the crowd and the company, they should do the same when dealing with payments. Sadly, all of the major crowdfunding platforms lack in this regard. If you're thinking about crowdfunding and are nervous about being shut down, I recommend you run either as donations or pre-orders. In the case of the latter, you are best not taking funds until the goal is met or you've reached a certain development milestone. I do think that this sucks for crowdfunding in general, but perhaps it will curtail the money grab that has been in place for some time. And of course, if you want to have as many options as possible, check out http://IgnitionDeck.com http://IgnitionDeck.com. A WordPress install and you can have your choice of gateways. Good luck to the Mailpile guys. I recommend providing this information. It will be good to have in the event that an investor knocks on the door.

jamestomasino 13y ago

Wow, I'm really surprised by the amount of snark on this thread aimed at mailpile. They are following IndieGoGo's standard process. For PayPal to take exception with them and single out their funds is ridiculous. If PayPal wants to start requiring IndieGoGo campaigns to submit business plans, they should work that out with the site, not an individual campaign, and certainly not after the whole thing is funded. This is not Mailpile's fault for following procedure.

gopher1 13y ago
Yes, it's odd how everyone is piling onto Mailpile for something that PayPal doesn't do with other IndieGoGo campaigns. If crowdfunding is so risky, why is PayPal totally fine with it for every other campaign out there? Yes they make promises and there's no guarantee they'll deliver. That's the whole point of crowdfunding, it's like that for every other campaign. Why is PayPal singling out Mailpile?

marijn 13y ago

I feel kind of bad about the fact that they initially didn't enable paypal donations, but enabled them a few hours after I suggested they do. I might be responsible. My own smaller (16k) indiegogo campaign went completely over paypal without a hitch [1]. Probably the fact that my paypal account has been seeing relatively large transaction volumes for years also helped prevent the alarm algorithm from triggering on it. [1]: http://www.indiegogo.com/projects/tern-intelligent-javascript-editing http://www.indiegogo.com/projects/tern-intelligent-javascrip...

Uchikoma 13y ago

Or you could read the terms of the business relationship with PayPal: Am I allowed to presell? Yes, you are allowed to presell items as long as you follow these guidelines. Off eBay presale requirements If you sell items in an online store (not eBay), you must guarantee delivery within 20 days from the date of purchase and make sure that the customer knows they are buying a presale item. [...] If you are selling goods or services in an online store (not eBay), you may be allowed to presell items but we may hold your money in a reserve account or limit what you can do with your account to reduce the higher risks associated with presale items. Or as the ruder ones of us said in the 90s on Usenet: RTFM. https://www.paypal-businesscenter.com/content/presale-policy-and-reserves https://www.paypal-businesscenter.com/content/presale-policy...

rip747 13y ago

this doesn't surprise me in the least. reading the comments, this thread is turning into a paypal bashing which it shouldn't. what happened is not paypal's fault or some insider attempt at stopping the project from happening as some laughable comments have suggested. paypal's top priority is to their customers, not the merchant. if you look at this from their perspective this is the right move as what would happen if the project just took the money and never delivered? asking them for a detailed list of `itemized budget and your development goal dates for your project` is something that any smart investor would ask for and they should have had this done already so i don't see why this is cause for concern.

hardwaresofton 13y ago

Shoulda taken bitcoins.

Uchikoma 13y ago

Paypal: If you presale we might freeze your account Merchant does presale Paypal freezes account Merchant: Why you did that?

kalleboo 13y ago
It's pretty ridiculous that IndieGogo allow PayPal for their campaigns when it's pretty much against the PayPal ToS.

devinmontgomery 13y ago

Anyone considering using PayPal as a seller should read Jessica Livingston's "Founders at Work" interview with Max Levchin. PayPal is an anti-fraud company that occasionally processes payments. It's appealing to customers and established merchants with slow, predictable growth and short lead times, but not for pre-orders. And I don't see them changing this - it's in their DNA. Kickstarter with Amazon Payments, in contrast and for better or worse, is the most pre-order friendly system imaginable. Tens of thousands to millions of dollars transferred in days with virtually no questions asked. The 14-day holding period they mention is only for first time projects.

andrechile 13y ago

seems like paypal CEO David Marcus is looking in to it. Whenever there is a high profile case like this that gets a lot of public attention he seems to get involved https://twitter.com/davidmarcus/status/375621484175060993 https://twitter.com/davidmarcus/status/375621484175060993

gregd 13y ago

Could it be that we've all missed the point entirely? Maybe, just maybe, Paypal was under duress from the Feds to cancel their Paypal account because they're afraid of what Mailpile would have accomplished?

dcuthbertson 13y ago

I wonder if Elon Musk cares at all that a service he created, one that made him incredibly wealthy, is so willfully abusive and corrupt. How about Pierre Omidyar or John Donahue? PayPal really needs to be investigated by federal governments, and put under strict oversight, regulations and controls.

duked 13y ago

It's funny at the same time paypal still let extorsion websites use its services: https://news.ycombinator.com/item?id=6328480 https://news.ycombinator.com/item?id=6328480

joshdance 13y ago

Don't use PayPal for pre-orders.

crucini 13y ago

> ... freedom to maintain your vision unbeholden to shareholders and 3rd parties. Aye, there's the rub. Many of us want that freedom, but it's rare. Powerful people are generally quite beholden to third parties. The president of the US can't do whatever he wants; neither can the CEO of Google. In order to make our dreams real, we must communicate them in common language to stakeholders, a process which may flatten them and drain their magic.

happywolf 13y ago

There is another angle to this: PayPal needs to make sure this money actually goes to a legitimate business, instead of some trick of money laundering. From PayPal's perspective, it has a hard time to differentiate this without details on what you claim you are going to do. If you have concern about PayPal knowing your plan and thus cause impact to your business plan, my thought will be if your business plan is so flimsy and fragile, how much confidence you are having? Same goes to if you have concerns of other people knowing and thus pilfering your ideas.

johnx123-up 13y ago

Can anybody explain... if using turnkey crowdfunding scripts like Agriya will help here? My previous company used Agriya and didn't face any issues from paypal. So just checking..

wmf 13y ago
No, nothing will help. If PayPal discovers that you are doing crowdfunding they will freeze your money forever. Some people got away with it because PayPal didn't notice them, but you can't predict that PayPal will not notice you in the future.

mcintyre1994 13y ago

I have to worry about how crowd-funding is going to continue to break records and change businesses when there's such a huge communication issue. If there is a risk of charge-backs for an undelivered product, which there clearly is based on Paypal's reaction, then people are clearly viewing them as pre-orders. That's obviously what it has become, but for crowd-funding to really be reasonable for companies like Paypal, failed projects have to leave backers out of pocket and nobody else. If crowd-funding is synonymous with pre-ordering a not yet available produce, I can't say I blame Paypal for wanting to keep out.

triplesec 13y ago

Paypal is well-known for this kind of behaviour. Search relevant terms through HN and various tech conferences have had issues with freezing and no warning and zero accountability and customer service.

nakedrobot2 13y ago

Sorry, Indiegogo - I will never use you for a crowdfunding campaign after seeing what Paypal does! I'll use Kickstarter, who uses Amazon Payments.

nakedrobot2 13y ago

Sorry, Indiegogo - I will never use you for a crowdfunding campaign after seeing what Paypal does! I'll use Kickstarter, who uses Amazon Payments.

gesman 13y ago

Paypal is unavoidable - there are just too much more money that can be made using Paypal because so many people use paypal and have positive balances at paypal and considering "paypal money" as "cheap money" - which makes them easier to spend to buy or to donate. Paypal is good when used for what it is good for - as a vessel to receive (and send) money easily. But no one ever said that Paypal is a great bank to keep money at. There are simple rules of the game to avoid disasters like that: The rules of using Paypal: transfer paypal balance to your bank account as soon as it reaches $500 or more. Once funds are transferred - transfer them to parallel bank account to keep them completely out of Paypal reach (as Paypal has full access to bank account connected to paypal account). That's it. Piling up cash at Paypal's account never been wise.

drivebyacct2 13y ago

Person who uses GoDaddy is shocked when they have domain/registrar issues. Person who knows to make backups but doesn't is shocked when they lose data and haven't made backups. Person who uses PayPal is "shocked" when their campaign funds are seized.

vermontdevil 13y ago

Apparently PayPal has reached out and unfroze the funds. http://arstechnica.com/business/2013/09/paypal-freezes-45000-of-mailpiles-crowdfunded-dollars/ http://arstechnica.com/business/2013/09/paypal-freezes-45000...

newobj 13y ago

How many horror stories do you have to hear until you don't use paypal and don't use anything that uses paypal?

DannyBee 13y ago

I believe the whole story and comments can be summed up as: 1. People want paypal to act as a big dumb money pipe from point A to point B 2. Paypal refuses to act as a big dumb money pipe from point A to point B when the risk is high that point A may want their money back, and paypal cannot shift the loss allocation to someone else. 3. Their risk mitigation strategy in the case of #2, while not atypical of the industry, upsets a lot of people who are not familiar with this type of thing occurring, and seems "unfair".

dpweb 13y ago

It's a complex question. Easy for Mailpile if they want to go to war about it. Start a new direct campaign somewhere else and tell their previous givers to request a charge-back. PP acting in its role in indemnifying buyers here, which is understandable, but it really isn't appropriate for them to pass judgement on MP business plans. Free market will sort this out anyway. IGG or givers will go to another platform if PP is seen as unreasonable. Few are going to go thru the trouble of a campaign if PP is constantly holding back the funds.

zodman 13y ago

son of bitches!

jgalt212 13y ago

It's amazing to me how revered the PayPal mafia is and continues to be despite all the detestation that continues to be heaped up PayPay, the company.