
PayPal Shuts Down Secure Messaging Service ProtonMail’s Crowdfunding Account - aespinoza
http://techcrunch.com/2014/07/01/paypal-shuts-down-secure-messaging-service-protonmails-crowdfunding-account/?ncid=rss
======
dangrossman
Yes, financial institutions do typically have "questions" they need "answered"
before making quarter million dollar loans to anonymous e-mail addresses.
There's no reason to put those in scare quotes, and it is very much a loan.
PayPal is the company making the credit card charges, and if they end up being
part of a scam or simply a poorly managed venture, PayPal is on the hook for
all the chargebacks -- the account holder could easily disappear or be
insolvent months later when they come in.

All the raised funds are at risk, for PayPal, for the 6-12 month period they
can be reversed. Even if donors do so without a valid reason, PayPal gets hit
with chargeback fees and needs to maintain a <1% reversal rate company-wide
just to do business with Visa and MasterCard. They're willing to let their
algorithms evaluate small risks (the typical eBay buyer/seller), but a human
steps in to do the underwriting for larger volume accounts, just like at every
MSP and bank.

The account got flagged for manual review, answered some questions, and was
open to accept payments again within the same day. That's better than most
banks I know which will take at least a few business days to approve a
merchant account. If you're going to be accepting hundreds of thousands of
dollars with PayPal, it might be smart to call them in advance instead of
waiting for them to call you.

~~~
josefresco
"anonymous e-mail addresses"

Doesn't PayPal urge you rather strongly to connect a bank account with your PP
account? I regularly advise clients on creating these accounts, and bank
account confirmation is typically the next thing they do after account
creation. Does this not apply worldwide ... or do some people actually trust
PayPal to hold their money?

~~~
dangrossman
Neither an e-mail address nor a bank account number really provides any of the
information PayPal would want to know to risk large sums of money on an
account: who they are, who's paying them, what those people expect to get for
their money, whether that thing is legal in their jurisdiction and not a
disallowed use of the service, etc.

------
danielweber
Their account is already turned back on: [https://protonmail.ch/blog/paypal-
freezes-protonmail-campaig...](https://protonmail.ch/blog/paypal-freezes-
protonmail-campaign-funds/)

~~~
higherpurpose
Not even an apology for that ridiculous reason they used to freeze the
account. They're acting as if it never happened.

~~~
milesskorpen
So many HN commenters have this gut hatred of PayPal, which honestly isn't
warranted. You'd find trouble finding ANYTHING that can accept $300k in
donations for an unreleased product without some kind of review. This is the
case over and over again in these "PayPal froze my account" horror-
stories/whines, and somehow people have trouble learning to just contact the
company FIRST and let them do the investigation before funding begins, instead
of while in progress.

I defy you to find a single other financial partner who'd let this kind of
behavior slide without review. (And Bitcoin doesn't count ... not if you want
to accept donations from any reasonably large number of people.)

~~~
watwut
The "have you government approval to encrypt emails" [1] question was not
necessary through. They did not even specified which government they mean.

[1] [https://protonmail.ch/blog/paypal-freezes-protonmail-
campaig...](https://protonmail.ch/blog/paypal-freezes-protonmail-campaign-
funds/)

~~~
dangrossman
It's pretty safe to assume "which government" is the government in which the
PayPal account was opened. This is an employee of a financial business trying
to determine if an organization they're underwriting is doing anything illegal
in their jurisdiction, as that would be a prohibited use of the service.
He/she is a normal human being, who isn't an expert in every possible line of
business, trying to suss out the information he/she needs to approve this
account -- put yourself in their shoes for a moment.

------
happywolf
PayPal may not explain things clearly, however if we imagine we were the risk
management team in PayPal, here is the picture:

An account gets a lot of money from different funding sources (credit cards,
ACH, etc.), the velocity is high, and most of the sources didn't have prior
transaction records with this said account. To the RM team, they cannot tell
if this is a legitimate transfer, or a massive transfer of booty by hackers.

Nevermind how famous this startup maybe, if your credit card were stolen, and
PayPal shows you an HN article "well, I thought you wanted to donate to this
startup X", how impress would you be? On top of that, the chance of CC
customers with hefty chargeback is something that no sane business entity can
take lightly.

PayPal may suck, but I don't see how a company with similar scale and
footprint will do better. Doing differently very likely will mean losing so
much money that it has to go out of business, or, have to partner with some
foreign company that sells products of questionable quality.

------
skizm
I asked on the reddit thread but got no answer: Doesn't PayPal not allow
accepting payment for non-existing goods or services? This would include
things like pre-orders and donations. If that's the case, this seems like a
legit reason to freeze the account. I might be wrong, but I could have sworn I
heard that somewhere.

~~~
timeuser
PayPal has pretty clear direction and limits regarding crowdfunding.

[https://developer.paypal.com/docs/classic/lifecycle/crowdfun...](https://developer.paypal.com/docs/classic/lifecycle/crowdfunding)

------
rockdoe
It's nice to propose Bitcoin as an alternative, but there's no "they didn't
make it so you get your money back" system like pledges, is there?

Also, I don't see how they qualify for PayPal donation status as a nonprofit,
so the outcome of this was predictable by day 1 and entirely their fault.

~~~
tinkerrr
Yes there is. See Assurance Contracts on the Bitcoin Protocol (they haven't
been implemented yet though, I think):
[https://en.bitcoin.it/wiki/Contracts#Example_3:_Assurance_co...](https://en.bitcoin.it/wiki/Contracts#Example_3:_Assurance_contracts)

~~~
rockdoe
_they haven 't been implemented yet though, I think_

That's kind of a show-stopper, then. Saying that Bitcoin is an alternative to
Paypal for these kind of Kickstarter-like efforts is just disingenuous and
exposing your "customers" needlessly.

~~~
tinkerrr
Well, USD doesn't have that feature either, but we have central agencies we
trust (e.g. kickstarter). There's no reason why that model cannot be used with
Bitcoin (so nothing disingenuous as you claim). The real power of Bitcoin
would be to be able to do this in a trust-less manner. It hasn't been
implemented yet, but exists in the Bitcoin Protocol. You're welcome to take a
shot at it, by the way, the core developer team is always looking for new
developers.

~~~
cwyers
"Well, USD doesn't have that feature either, but we have central agencies we
trust (e.g. kickstarter). There's no reason why that model cannot be used with
Bitcoin (so nothing disingenuous as you claim)."

Well, in this case, they're using one of those central agencies (PayPal). So
using PayPal as the central agency on Bitcoin would be exactly the same, and
using a different central agency is a change independent of the use of
Bitcoin.

"The real power of Bitcoin would be to be able to do this in a trust-less
manner. It hasn't been implemented yet, but exists in the Bitcoin Protocol.
You're welcome to take a shot at it, by the way, the core developer team is
always looking for new developers."

I don't know that 'Bitcoin has X if you write code to let Bitcoin do X' is
quite the same as 'Bitcoin has X.' Lots of things can do X if I put in all the
work to do X.

------
ilamont
_This also points to the urgent need for BTC adoption by both major
crowdfunding organizations because PayPal is dangerous._

Bitcoin has its own issues -- see "Bitcoin crowdfunding sites find funding
difficult" ([http://www.coindesk.com/bitcoin-crowdfunding-sites-find-
fund...](http://www.coindesk.com/bitcoin-crowdfunding-sites-find-funding-
difficult/)).

Even if the legal/security issues are worked out, it will take a lot of
convincing to get mainstream users/potential crowdfunding donors on board.
People don't trust what they don't understand, and the fact that the value of
BTC is so unstable is a giant red flag. Would Joe Shmoe plunk down fiat for X
$BTC, with the knowledge that the exchange may fail or the value of his
investment may plunge the next day?

~~~
DennisP
Those legal issues only apply to equity crowdfunding, not presale/donation
crowdfunds like those on Kickstarter and Indiegogo.

------
al2o3cr
"This also points to the urgent need for BTC adoption by both major
crowdfunding organizations because PayPal is dangerous."

Yeah, because having exactly zero recourse when the crowdfunded thing turns
out to be a scam is totally what people are looking for.

Paypal is can be quite a pain in the ass with fraud prevention etc, but
pretending that switching to a system with NO dispute resolution is better is
ridiculous.

------
giancarlostoro
They didn't shut down their account, they froze it, huge distinction.

------
smackfu
It's kind of odd that this project is using crowdfunding at all. As far as I
can tell, they are just selling software as a service, and the service already
exists.

~~~
dangrossman
It's freemium, and no doubt like most freemium services, 99%+ of the users
will pay nothing for it. They are raising funds to host that free service
until it becomes self-sustaining through the optional upgrades.

------
paulschreiber
When will people learn to stop using PayPal for these things?

------
tzar
Previous submission is here:
[https://news.ycombinator.com/item?id=7968737](https://news.ycombinator.com/item?id=7968737)

------
st22
What is a good alternative to paypal if you run a business ?

~~~
adzicg
Paypal used to be the easiest thing to integrate - especially because they
would handle the entire backend server workflow, and you just get a ping from
their back end when the thing is done. They also have the instant payment
button that would accumulate payments and consolidate orders without you even
having a backend.

If you're looking for something similar to the payment integration, Stripe is
pretty similar in terms of development effort and can even run a form on your
(static) web site. You still have to do a bit of processing on your end, but
we're talking about a few hours of work tops.

We ran a subscription business for a few months without a real backend or a
database (validating that there is a demand) using stripe and JotForm. Jotform
is a very simple forms builder and server online that can handle a trivial
product selection, collect custom information, execute a payment workflow and
send the customer and you an e-mail at the end, optionally showing the
customer a confirmation page. Yes, all this is doable by a good programmer in
a day or two, but it costs next to nothing on JotForm and allowed us to play
with the process until we got it right. Their site can run paypal and stripe
(and a few other things) so in case paypal blocks you it's easy to switch to a
different provider without customers noticing anything.

Stripe doesn't offer seller or buyer protection - which is another benefit of
PayPal. I don't know anyone else who does that.

