

How Diaspora Found Its Tiger Stripe in the Midst of a Paypal Fiasco - postfuturist
http://blog.diasporafoundation.org/2011/10/19/how-diaspora-found-its-tiger-stripe-in-the-midst-of-a-paypal-fiasco.html

======
ohboy
As a business owner who once had their Paypal account frozen (mistakenly, but
frozen nonetheless) 10 years ago and now does $10,000+ every month through
Paypal I can say they're doing something wrong. Paypal doesn't need to steal
money, they make billions a year, they don't need your $45,000.

Something smells rotten and it's Diaspora. $200,000 and over one year later
and they have nothing to show for it and they're still begging for money. They
promised a finished product for $10,000, they received $200,000 and they're
still not done. Why are people still giving them money? If a contractor said
$10,000 to replace my roof and I gave him $200,000 and he came back saying he
needed more I'd call the police and sue, not give him another $45,000

So what happens when they get another 20k or 60k or 200k and they say "oops
that's not enough", everyone gets a refund? Or does Diaspora walk away? Or do
they hold another donation round in a year?

Sooo disappointed in Diaspora, so many startups could have been created with
$200k but they burned the money and now they're back asking for more, like
watching a homeless guy buy alcohol with the 20 you just gave him and he comes
back asking for more money.

Zuckerberg was just an average programmer and he made Facebook with almost no
funding while attending college, these four get $200,000 and make nothing.

I'd love to know what these donators are thinking, can anyone give me a good
reason why it's a good idea to keep giving Diaspora money when they already
show no progress from the first $200,000 they were given? If you're a donator
how will you feel when they receive another 20 or 200k and Diaspora is still a
flop?

~~~
Estragon

      ...over one year later and they have nothing to show for it
      and they're still begging for money.
    

I have no dog in this fight, but your comment confuses me, because there seems
to be quite a lot going on. If I look at the "contribute" page[1] and the list
of sites publically running diaspora at this stage[2], I see a great deal of
progress and useful code. Not a finished product yet, by any means, but they
definitely have something pretty concrete to show for their efforts so far.

[1] <http://diasporafoundation.org/get_involved>

[2] [https://github.com/diaspora/diaspora/wiki/Community-
supporte...](https://github.com/diaspora/diaspora/wiki/Community-supported-
pods)

~~~
jemka
I believe his comment was relative and not to be taken literally. Yes, code
has been written, but that is hardly a counter argument to the facts
presented.

~~~
Estragon
It appears that not only has code been written, it's been publically deployed
and used for social networking. I'd say that's a fair step beyond "nothing to
show for it."

------
dangrossman
"When PayPal mysteriously and arbitrarily decided to freeze everyone’s
donations..."

"...We had raised $45,000 in just a few days, and then PayPal froze our
account."

Not so mysterious. Believe it or not, no payment service is going to allow you
to collect tens of thousands of dollars in a few days with just a name and an
e-mail to identify you. The criminal abuse would be rampant. If that doesn't
raise the red flags at the risk department of any processor they'd be out of
business in no time.

Just another rehash of the same story we've seen on HN a dozen times this
year, as recently as ~2 weeks ago with the game developer taking preorders for
an undeveloped game -- who eventually satisfied PayPal and later wrote a post
about how Google Checkout was worse and PayPal was not so unreasonable after
all.

"Yes, you heard that right. PayPal gets to earn interest on all of our
donations for 6 months"

If PayPal's agreements with its underwriting banks are anything like the rest
of the merchant processing world, then reserve accounts are always non-
interest-bearing to prevent any incentive to create them without proper
justification.

~~~
pc
"Believe it or not, no payment service is going to allow you to collect tens
of thousands of dollars in a few days with just a name and an e-mail to
identify you."

Using the email address and name is hardly the best way to evaluate the
trustworthiness of Diaspora.

There are lots of reasonable questions about how to scale underwriting
systems, and how this might work generally, but we shouldn't neglect the fact
that in this particular situation 1) Diaspora not being able to receive
donations is a bad outcome, and 2) there isn't exactly a paucity of public
information about them.

~~~
dangrossman
For all PayPal knows at the point they freeze the account, it's some teen in
Romania that has no connection to the project and is using its name to collect
donations for personal use. First they have to stop the potential fraud from
growing even more damaging to them by freezing the account, then they need to
figure out who they're really working with, then they need to evaluate the
risk of accepting those payments.

~~~
pc
From the post: "Even though we’ve complied with every PayPal request,
including providing them with our certificate of incorporation, they still
won’t give us an explanation for any of their moves."

It seems that Diaspora weren't unwilling to verify their identity.

~~~
dangrossman
Yes, although the blog post that their account was frozen is dated yesterday,
so who knows if anyone at PayPal has even had a chance to review it yet. That
indie developer (I forget their name to look it up again) had also posted on
their blog that their account was closed, then a few days later PayPal
reversed itself and reopened it -- that may still happen here. I hope it does,
as on its face Diaspora doesn't seem like an organization that would attract
too much risk.

------
iridesce
Wow, lots of talk here about a service that none seem to have used.

You all are probably way more involved in creating software and doing private
finance than I will ever be, so I can't speak to those areas.

I've been using Diaspora for about a month now - maybe a little while longer
and while there are growing pains, I've been really impressed with the way the
service works.

While there are lots of people who use Diaspora and Facebook, I ( hopefully )
deleted my Facebook account as I got tired of being the product and use
Diaspora exclusively.

And like I said, I'm no tech guru. Any operational questions that I posted
were answered promptly and courteously. The folks there are still claiming its
alpha, and it works pretty well for me.

Oh, and to the registration question - I Scroogled ' diaspora pod ' and the
first listing was for [https://github.com/diaspora/diaspora/wiki/Community-
supporte...](https://github.com/diaspora/diaspora/wiki/Community-supported-
pods). The fourth listing is the pod that I belong to diasp.org - I had no
problem signing up the first day I tried.

Try it for yourself and then let us know what you thought

------
citricsquid
The most mysterious thing is that people actually donated to diaspora? If
we've seen what they can achieve with $200k I somehow doubt $40k is going to
get us more than... nothing.

> Obviously, PayPal’s behavior is unacceptable, which is why we have asked our
> lawyer to get involved.

oh wait, that's where any money is going to go.

~~~
Joeboy
I agree that they weren't the ideal recipients of $200k, but they have
produced a fairly functional and usable product. I don't understand the hate
they get on HN.

~~~
k-mcgrady
The problem is that most people haven't seen the product. I asked for an
invite the day they opened them and still haven't gotten one. It has taken
them that long that I won't be using it now. Facebook's timeline is great and
Google+ is also a good network.

~~~
Joeboy
Yes, I have no idea why they're shooting themselves in the foot like that. You
can sign up and use the product at lots of other places though (see
<http://podupti.me/> for options).

------
diaspanon
Diaspora is up and running and is it is a great project. They are non-
commercial, do not sell your info, and survive on donations and grants.
Everyone should open a free account and donate if they like what they see.
<https://diasp.org/> No invites needed. Please boycott someone else.

------
Raphael
Just shows the naïveté of the Diaspora team. No surprises here.

~~~
Joeboy
Is expecting Paypal to give you your money really _that_ naïve?

~~~
bigiain
Yep.

If you're not shipping physical products within a day or two of accepting the
money, and shipping them via a service which allows you/your customer/paypal
to track the deliveries, then you're in the category who should expect Paypal
to decide to hang on to any money put into your account.

Surely anybody who's got access to Google can find that out before getting
caught out by it?

~~~
Joeboy
Googling "paypal donations" doesn't immediately yield that information. My
expectation would be that since Paypal advertises a donations service, they
probably provide one, and that it probably ought to result in you being able
to collect your donations.

~~~
ebaysucks
Sure, if you are in fact a non-profit.

Everybody is allowed to receive the occasional donation (pretty generous of
Paypal, as they don't charge commission on that), but if you build a "business
of receiving donations" you need to proof you are a non-profit.

It's that obvious.

------
VonLipwig
Hmm, all sounds a bit strange.

While I don't approve of PayPal freezing payment's I can kind of get it with a
conference which may or may not take place. They need to protect themselves
from having to hand out potentially thousands of dollars in compensation.

What I don't get is why they would freeze an account getting donations. It is
a donation. You are not paying for a service which may or may not arrive.
Seem's very very strange.

~~~
dangrossman
Money laundering. Selling illegal products or services in the guise of
donations. Posing as an organization you're not even affiliated with to ask
for those donations. Just because someone, who PayPal only knows as a name and
an e-mail address, claims to be taking donations does not mean that's actually
what's going on. When those donations go from $0 to $45,000 in a few days, it
behooves them to identify that customer and check out exactly where all that
money is coming from and what risk is associated with it.

Even if they are bonafide donations, if there are expectations attached to
those funds (that the company is going to build a product or perform a
specific service, or put it towards a certain cause) and there's a risk those
expectations won't be met, then there's a risk for PayPal that some of those
donors are going to be upset and do something about it -- like cry fraud and
charge back the payments. PayPal has to carefully manage its chargeback rate
like every other merchant.

~~~
kseudo
How do flattr get around this problem? They use paypal and it looks like they
could be used for money laundering

~~~
dangrossman
By not having a huge spike in volume on a new account, providing information
about the business to PayPal at some point, and by having a track record of
low risk. It's not a problem to open a PayPal account and start accepting
payments, it's only a problem to do that, not have any verified information in
your account yet, then also do something to raise red flags. And for most
people, even when that happens, once you give PayPal enough info to convince
them you're not doing something shady, they'll unfreeze the account and you
take payments without a problem for years after.

------
pork
Oh come on people, it's not a fiasco. Has nobody watched Breaking Bad? Money
laundering!

~~~
Estragon
Obviously, the solution is bitcoin.

------
shareme
I have a paypal question..What happens when you plan ahead and supply paypal
with additional information such as incorporation papers, etc when setting up
a new account?

------
jsavimbi
The Diaspora crew suffers from Münchausen syndrome.

