
Paypal is holding over 600,000 euros from the minecraft developer - xelfer
http://notch.tumblr.com/post/1096322756/working-on-a-friday-update-crying-over-paypal
======
jdietrich
We've been going around in circles with stories like this for years. In spite
of all the horror stories, people are still using PayPal. That would indicate
to me that either PayPal are exploiting a monopoly position, or there is a
massive gap in the market for a fast, easy payment system that doesn't treat
serious customers like dirt.

I completely understand the Googley argument that you can't provide much
customer service if you have millions of users with a tiny average revenue,
but what sense is there in treating a €600,000 account so poorly? Surely they
must know that they have lost him forever as a customer.

The only logical answer I have as to why PayPal do this to big customers is
that they know that as soon as anyone gets big they leave for a cheaper
merchant account, so their account freeze is just a way for them to hold on to
a customer long enough to make some real money out of them. I can't believe
that they would, but I'm struggling to work out why else they would act like
this.

~~~
btilly
_That would indicate to me that either PayPal are exploiting a monopoly
position, or there is a massive gap in the market for a fast, easy payment
system that doesn't treat serious customers like dirt._

You're missing the third possibility, which is that efficiently doing what
PayPal requires requires "treating serious customers like dirt."

PayPal is in the business of efficiently detecting and not paying for fraud.
One type of fraud that they need to deal with is fraudsters getting control of
an established account, sticking lots of fake payments in, then withdrawing
the "money" before PayPal notices that it isn't real. Their strategy for this
seems to be to make people jump over a low paperwork barrier, then wait long
enough that the payments have all cleared before they pay out. Given this,
paying for a dedicated customer service representative for the victim on top
of that strategy is an inefficiency.

The last part of that decision ignores the effect of pissing people off on
their reputation, and so may be shortsighted. But the rest of their strategy
makes sense to me.

~~~
houseabsolute
> Their strategy for this seems to be to make people jump over a low paperwork
> barrier, then wait long enough that the payments have all cleared before
> they pay out.

I wonder why they don't just do this by default? Personally I would not be
offended at all if they just had a status on the payments called "waiting for
payment to clear."

~~~
jws
Consumers can reverse credit card payments up to six months out.

~~~
pbhjpbhj
That's a product insurance system though isn't it, it's not clearing or
failing to pay.

~~~
tedunangst
If a transaction can be reversed, it hasn't cleared.

~~~
pbhjpbhj
What I'm saying is that my impression is that the transaction is not reversed
but that a subsequent insurance claim is made.

IMO if the money is available for you to spend then it has "cleared". Money
that has cleared may be recouped, eg when you sell something fraudulently and
get nabbed.

~~~
tedunangst
If you fraudulently sell something and then spend the money, how does paypal
recoup it?

------
mattmanser
At least he's a known internet guy, it's pretty clear where the money is
coming from and this post alone will get paypal to sort it immediately.

But why do you have to be a celeb to get decent support from paypal? Freezing
over half a million euros and they don't even assign him a dedicated support
person? They don't call him? Disgraceful.

~~~
jacquesm
> it's pretty clear where the money is coming from and this post alone will
> get paypal to sort it immediately.

I wouldn't bank on that. It's possible, but by no means sure.

> But why do you have to be a celeb to get decent support from paypal?

Consider the fact that he _is_ a celebrity and does not get decent support,
you can imagine how it is for the rest of the world.

Especially when you're not in the US.

> Freezing over half a million euros and they don't even assign him a
> dedicated support person? They don't call him? Disgraceful.

Business as usual for PayPal, see below.

~~~
mattmanser
Minecraft games sales.

Unless the whole minecraft thing is a cunningly disguised money laundering
scheme for the illegal sale of fjords to rich American businessmen...

We've heard this one before, a surge in sales triggers Paypal's fraud systems.

~~~
jacquesm
So what? In my case it was a bunch of newspaper articles about our website
that made us grow quite a bit in a short time. A surge is not always fraud
related and in the case of an account with long history of being 'in good
standing' it is not entirely unexpected to do a bit of follow up after you've
frozen the account 'just in case'.

Unfortunately paypal and courtesy only appear in the same sentence when there
is a negative in there somewhere.

~~~
mattmanser
Ah, sorry, misunderstanding what you meant, you meant paypal sorting it out, I
thought you were talking about where the sales were coming from.

------
drtse4
Another Paypal horror story added to the list. If someone was wondering (as i
did), no, he didn't let 600k on his paypal account. That's what he's earned
since they limited his account 25th august.

See <http://twitter.com/Toucanator/status/24089600756> and
<http://twitter.com/xnotch/statuses/24089647124> .

EDIT: Minecraft complete steam sales data,amazing:
<http://m00d.net/minecraft/sales/>

~~~
laverick
So he's sold 60k prepurchases at EUR 9.95 in a little over two weeks?! Holy
cow.

Found some stats - <http://www.minecraft.net/stats.jsp>

~~~
jakewalker
Prepurchases? Pretty sure that could be the problem - - PayPal doesn't permit
charging someone for goods that aren't going to ship immediately.

~~~
DavidPP
It's not exactly a prepurchase since for 13$ you get access to the alpha
version.

------
shin_lao
The "paypal blocked my money" stories are frequent.

I'm curious to which extent this is legal. I'm pretty sure a bank isn't
allowed to block access to your accounts without a formal request from a legal
entity.

Paypal doesn't "own" the money. This sounds to me as extremely abusive.

Is that this frequent?

~~~
acabal
That's the rub--Paypal _is not a bank_. They can do whatever they want with
the virtual money that is exchanged on their servers. Which is why a real
merchant account is the only serious option for a larger-scale business.

~~~
mattmanser
They are a bank in Europe, just not the US. Sounds like the whole legal status
in the US is a bit of a mess really:

<http://en.wikipedia.org/wiki/PayPal#Regulation>

~~~
all
While that may be true, Luxembourg is known as a tax haven. I note that Amazon
also registers its European operations there. From the same source as you
cited:

"Concern about Luxembourg's banking secrecy laws, and its reputation as a tax
haven, led in April 2009 to it being added to a "grey list" of nations with
questionable banking arrangements by the G20."
[<http://en.wikipedia.org/wiki/Economy_of_Luxembourg#Banking>]

So, in effect, Paypal is probably a bank in nominal terms only. They can still
do pretty much whatever they want with your money and get away with it. That
is why my company went with WorldPay even when we started out. We don't get
charged any fees, just commission, and we get free fraud insurance on the
major credit cards.

~~~
auxbuss
Paypal is a bank in Europe, as stated. I was one of those who lobbied to
achieve this. I was burned by this odious outfit more than five years ago. You
don't get two chances with someone else's money in their lifetime.

You can't be a bank "in nominal terms only" in Europe. Once registered as a
bank you are bound by EU and Member State laws. There's no sidestepping that.
Governments can't sidestep them.

The fact that Paypal is registered as a bank in a European Member State means
that they must abide by these laws and the regulation that goes with it.

Remember, loser pays in European courts. So when a bank steps outside the law,
it will be liable for costs and "damages". It is not in their interests to
break or even "stretch" the law.

Regardless, I wouldn't do business with Paypal if you paid me. Well, perhaps I
would, but pay it straight to my bank, and not via Paypal.

P.S. My fight goes on: this week I have been active again in the European
Parliament with MEPs fighting to get the appalling ACTA spiked. Something we
should all be aware of and striving to kill.

------
helium
I'm building a website that I would like to launch soon and were planning on
selling digital goods. My initial idea was to just use the PayPal shopping
cart, since I already have a PayPal account and it so easy to set up(I
definitely don't want to go through the hassle of setting up a merchant
account).

But all these horror stories I have read on HN the last few days have scared
me a bit. I also seems that its even worse if you're not a US citizen,
especially if you live in a "suspicious' country (I'm South African, not
really a country with high internet fraud cases, but all African countries are
painted in a bad light for some reason). But are there really any good
alternatives?

~~~
bryanh
I run BitBuffet.com where we enable end users to sell digital downloads and we
use PayPal exclusively. These horror stories are somewhat uncommon (we've
never experienced one or heard of a customer experiencing one).

My advice: go with PayPal until you are making well over $2-4k a month, then
switch to a dedicated merchant account once you have proven volume. There are
100 other more likely points of failure than not getting your money from
PayPal.

~~~
cullenking
That's what we have done. Paypal horror stories freak me out, so I regularly
withdraw to my bank account and then transfer to another account so paypal
can't go after the withdraw. Paranoid, yes, but better than nothing.

Now that we have $1.5k a month in donations, we are using Braintree. Wasn't
worth setting up before proving financial viability, but definitely worth the
peace of mind with a proven business. Great piece of advice.

------
buster
What.. just bought Minecraft last week, awesome :)

Hope he gets this sorted out.. Also i think it's quite interesting to see one
person making such an amount of money with an alpha version of a game that has
not much content and graphics from the last century but fun gameplay. EA and
friends should learn from this.

~~~
stuhacking
Fun gameplay is the key. For the rest, we have our imaginations. (I can't
remember the last time a game scared me as much as when I fell down a pitch
black cave and heard the groaning coming from all directions! :eek:)

Edit: Sorry, I'm not trying to make a counterpoint, I agree with your
statement.

~~~
wallflower
Re: Fun/Imaginative gameplay.

Jason Rohrer

<http://hcsoftware.sourceforge.net/jason-rohrer/>

------
EvilTrout
I run a browser based MMO that once upon a time earned a fair amount of money
(not at Minecraft's astonishing levels though!) and Paypal is my only method
of payment. The first time I made a large withdrawal (10s of thousands) they
did something similar.

I think people are being very knee-jerk with their reactions about all of
this. Yes, it's annoying to have your money frozen temporarily, but Paypal is
basically on the line for all of that money if it turns out to be fraudulent.
All they need is a series of business documents proving you really are who you
say you are, and then they will hand over the money.

Let's face it, few people show up out of nowhere and earn a million dollars in
a month!

Notch even knows this, if you read his blog post he says he's sure it'll get
sorted out. Once you go through this process once they will not do it again.

~~~
parallax7d
It sounds like they screwed you too, and your defending them?

It sound suspiciously like they just want to keep the money for as long as
possible. Collecting interest on your assets is a clear profit motive.

~~~
EvilTrout
I don't consider myself screwed at all. They held my money until I gave them
proper documentation. When you run a business this kind of thing happens all
the time. Just paying taxes to the government was way more complicated and
intrusive.

Yes they can earn interest on money, but it's much more likely to me that they
are covering their asses about the money rather than earning a small amount of
interest on it.

Paypal has to deal with a lot of fraud. If you listen to the owners in
interviews they say they lost a ridiculous amount of money in the early years
to fraudulent users. It is reasonable for them, in my opinion, to make sure
the money was owed to you before giving it to you.

~~~
calloc
In my ING Direct account (savings) I earn 1.1% APY currently, on 600.000 that
is 6.600, that is 550 a month. If they freeze your accounts for two months,
they have "earned" 1.100.

Now think of the amount of money going through paypal or sitting in paypal
accounts, that is a fair chunk of change.

------
div
I wonder what someone's legal recourse is in a situation like this. I mean
what gives Paypal the right to claim 'suspicious activity, your money is ours'
without having to provide some kind of evidence.

And IF something is a legitimate case of fraud, aren't they required to simply
freeze the assets and turn the account holder over to the appropriate
authorities ?

It's hard to imagine that this type of due process can be waived simply by
having agreed to certain terms & conditions.

------
mmaunder
We ditched paypal because:

1\. Their site is very slow which hurt conversions. People who may have simply
paid using a regular credit card went down the PP funnel and got frustrated
and simply left.

2\. Retention for monthly subscribers was 10 to 20% lower than credit card
subscribers.

3\. Refund policy sucked. It would take several days for our customers to get
their money back if we refunded them.

4\. Tools to manage bulk recurring subscriptions sucked.

So glad we're free of them.

~~~
dRother
Their site really is slow as can be. I dread not being able to dig something
up in my email, that means I have to go use Paypal's search - each page can
seriously take 10-15 seconds to come up.

------
lkrubner
I had a similar case with PayPal, back in 2001, but the sums were much
smaller. I was doing freelance work, and most of my clients paid me via
PayPal. Then PayPal froze my account, when I had about $2,500 in it. I needed
that money to pay rent. It took about 6 weeks before they re-opened my
account. To pay rent I had to borrow money from friends and family. PayPal was
very hard to deal with. They kept asking for proof that I was me. They wanted
me to send bills that verified my address, but I was subletting an apartment
for 3 months and had very little evidence that I was really me.

At another time some friends of mine started a business with me and we had a
PayPal account for awhile. At some point we stopped using it, and then someone
sent us $200. I've no idea what happened to that $200. Possibly it got auto-
refunded at some point. Possibly it is still sitting there, in the account.
Whatever email address we used for that account was tied to the company we
had, which had a domain name we gave up on years ago.

All the same, PayPal is the easiest way to go when you are starting up a new
site. And PayPal has aggressively bought up some of the competition that used
to be a lot better than PayPal. (PayFlow Pro, for instance)

------
smutticus
I bought Minecraft so I guess part of this money is/was mine.

I never understand why people still use Paypal. There are so many horror
stories and so many alternatives. Just don't use them.

~~~
pmichaud
What alternatives?

~~~
die_sekte
There's Google Checkout and Amazon Payments, neither of which work outside the
US. There's also AlertPay, which is apparently used by IPREDator and which is
sometimes used by 7chan. I'm not sure whether I trust them more than PayPal.

~~~
drtse4
Do you mean that you can't register to checkout and amazon as a seller if you
are not an US resident? Because as a buyer i've used checkout a lot of times
from Italy, same thing should be possible in other european countries.

~~~
sankara
It works for buyers as long as you have an international card. But to register
as a seller a US bank account is a must. Given the new features added to
Checkout By Amazon and all the Paypal stories, they might get traction if they
remove that "US only" tag. Not sure how easy it is though.

------
naturalized
We operate a large site with thousands of PayPal payments per day. This is a
sample email we just got from PP:

Hello ....,

We were recently notified that a payment you received was reversed by the
buyer's bank.

As a result, we have reversed the following transaction: Transaction date: xxx
Transaction amount: xxx USD Buyer's email: xxx Buyer's name: xxx Your
transaction ID: xxxx

PayPal is committed to maintaining a safe environment for our buyers and
sellers. You can help protect yourself against claims and reversals by
following the guidelines of our .

Thanks,

PayPal

Note that their email template has a bug: it says " following the guidelines
of our ."! Cannot they fix their email templates? They are dealing with f..ing
real money! The Viagra spam that I get has less bugs in their email templates!

------
Artifex
I keep wondering why there isn't a Ycombinator-funded paypal killer.

I'm not a developer/coder/anything close to one, or I would do this myself.

Come on, guys! Get on this!

~~~
paraschopra
Paypal was once losinf $100 million per month. Who is going to fund that in
these non-2000 AD days?

------
mcherm
Google is trying to create their own payment system. It hasn't gotten much
traction. Why don't they go ahead and support countries throughout the world
(if they want to leave out a FEW places like North Korea that would be fine)?
Seems to me that then they would have a ready-made constituency. Not to
mention pleasing a huge number of Android developers. Yet they don't do
this... Why? There must be something difficult or dangerous about it, but
what? Does anyone know the answer?

~~~
robgough
Is it also worth pointing out that Google isn't exactly known for it's high
level of customer service. Is there any reason to think they won't be just as
bad as PayPal if they had the same number of customers.

I can't believe there isn't a _better_ option yet, it's not like PayPal have
suddenly become worse. Stories like this have been around for years.

~~~
desigooner
google does many things well. customer service, not well at all. i had a
torrid time dealing with them when i bought a nexus one when it launched.

------
smackfu
How do people not know that Paypal does this by now? Wouldn't you want to
avoid Paypal?

~~~
daychilde
The problem is that it's difficult to find a better solution.

If all goes well, Paypal is generally by far the best option.

If all goes poorly... not so much.

But for most, it goes well.

------
InclinedPlane
Paypal has the most customers of any financial institution in the world, they
have some of the largest challenges of any financial institution in the world.
Not the least of which being that everybody who is capable of using paypal is
simultaneously connected to the biggest and most efficient megaphone ever
invented (the internet) and the unique consequences for bad press that
situation entails.

You can decry paypal's customer service, no doubt, but recognize that the root
cause of these problems are all of the very real scammers who have abused the
system and never make the news. Consider an analogous situation, check fraud.
There are many stores and restaurants that do not accept checks, is this
because banks are evil and hate honoring checks? No, it's because of repeated
abuse from fraudsters devaluing checks as a method of payment. The same is
happening here with online payments. You can get around the problem by paying
more money for a merchant account but that only protects you from the
immediate effects of the problem for a little while.

~~~
argv_empty
_You can decry paypal's customer service, no doubt, but recognize that the
root cause of these problems are all of the very real scammers who have abused
the system and never make the news._

If you discover that you have processed a fraudulent transaction, undoing it
is quite understandable, but keeping the money for yourself (as per the link)
is a pretty shady solution.

~~~
InclinedPlane
Fraud is not so simple. Step 1 is identifying a _potentially_ fraudulent
transaction. Most financial institutions put the breaks on any funds transfer
in that case until a further investigation has completed, rather than merely
reversing the previous operation (indeed, that would lead to an even greater
adverse impact on false positive cases and would aid the fraudsters as well).

If withdrawals from your bank account is frozen due to suspected (or actual)
fraud, few people jump to the conclusion that the bank is out to snatch up
their money. Why not extend paypal the same courtesy?

~~~
argv_empty
_Why not extend paypal the same courtesy?_

From my previous post: "keeping the money for yourself _(as per the link)_ "

~~~
InclinedPlane
I addressed that. Do you not appreciate that when a bank freezes an account
for fraud that it too is "keeping the money for itself"? Indeed, this is the
appropriate course of action until a better determination of whether or not
fraud is involved is made, whether you're Chase or PayPal.

Let me be more clear: what, precisely, makes you believe that when paypal
freezes an account due to suspected fraud that it is more likely _actually_
due to nefarious purposes on their part than when Chase or Bank of America or
any other bank takes exactly the same actions for exactly the same reasons?

------
zabraxias
I work at PayPal, though not in fraud detection, and it always seems
interesting how much bad publicity the company is getting lately. I personally
wish they would address the social part of doing business on the web.

There's a reason why the hold explanations are vague but it has nothing to do
with questionable intentions.

------
anthony_franco
We've experienced this issue in the past. If you're gonna use PayPal, here are
some tips:

1) Use your full legal name when creating the account.

2) If you're creating the account for a company, make sure the owner of the
account is an officer of the company (CEO, Vice President, etc).

3) Have only one account. If you're creating an account for your business, and
you already have a personal account, you're gonna run into problems.

4) Make sure the mailing address you give is actually accessible. PayPal's
gonna mail a verification code to you once you start making a sizable amount.

And just in general, once you start getting money into your account, PayPal's
always gonna come knocking. At one point, PayPal prevented us from even
receiving payments. But eventually, after a while of working with them, they
got off our backs and we stopped having problems with them.

------
bluelu
Most of the paypal horror stories always relate to paypal users not providing
or not willing to provide valid information to identify their accounts.

In Luxembourg (and paypal is a registred and regulated bank in Luxembourg),
the government requires the bank to know it's customers identities, otherwise
the bank is not allowed to do business with their customers. And an email will
not be enough. You have to provide passports/identity cards.

And I guess that's what happens here. After a certain transaction amount,
paypal requires more information than just an email address.

------
bosch
When will:

1) Companies learn that to cheap out on the payment process and go through
PayPal is stupid and things like this WILL happen. You deserve what happens
when you go through PayPal as it means you either didn't research it's history
or didn't listen to the warnings.

2) Customers learn not to do business with a company that is too cheap to
setup their own payment process and not go through PayPal. By supporting
business' that are using PayPal we allow the cycle to continue.

------
bobx11
I never realized how easy it was to setup a merchant account / processor until
paypal scared me into doing it.

------
tomjen3
We need some way to force paypal to stop defrauding honest people (as well as
being faster, but that isn't such a big problem).

Unfortunately there doesn't really exist a good alternative outside the US.

Anybody knows how to start lobbying against paypal?

------
fbnt
Why on earth would you keep 600K on your paypal account anyway?

~~~
shabda
<http://twitter.com/xnotch/statuses/24089647124>

~~~
hubb
actually this tweet explains it a little better:
<http://twitter.com/xnotch/status/24100656191>

~~~
eru
You are funny. Tweets are only a line long or so, so you might as well have
copied the thing (with attribution).

~~~
dRother
Directing to the original source is more authoritative and informative.

~~~
dpritchett
Quoting and linking back to the tweet seems like a nice compromise.

------
omd
It's a small consolation, but at least this business with PayPal is giving him
some good publicity. I'd never heard of Minecraft until now.

------
kefs
Why has no one mentioned WePay.com?

~~~
aberman
Thanks for the shout-out!

Unfortunately, we don't do international (non- U.S.) transactions...yet

------
zzleeper
Wtf I just bought his game yesterday, and he can't even get his money??

------
known
Why US Administration is not converting Paypal into a bank?

------
bobx11
same happened to me recently - though my balance was under 10k, so it was less
scary. I called and asked nicely until I got the restrictions removed.

------
bond
Disgraceful...

------
korch
Everyone has known for years that Paypal is awful, regularly steals large
amounts of money held by perfectly legitimate customers, and does it all
through inscrutable, unfriendly, customer-service processes.

 _I know this, man._

Yet Paypal is bigger than ever, and there's no glimmer of improvement on the
horizon.

So either we assume Ebay, the parent corp, is so clueless about milking Paypal
for profit while reinvesting as little as possible back into it, or we assume
Ebay has a reason for not improving Paypal in any significant way in the past
5+ years.

I'm starting to suspect there's a great financial reason for Ebay to keep
doing this. And it might be a similar financial strategy that Amazon has
famously used from day 1. Amazon collect payments immediately, yet ships items
much later. This means their cashflow is always more than their inventory
expenses at any given moment. For however much time there is until that gap
closes, Amazon is in a great position—essentially getting a short term loan,
and if you consider their volume of transactions, that is billions of cash
being held in floating pools.

 _What if Paypal provides a similar benefit to Ebay's bottom line?_ Paypal
isn't a bank, so they can do whatever they want with the held funds. I suppose
what actually happens to the held funds is a corporate secret they guard
carefully. But I bet it props up Ebay's cashflow in a major way. If Ebay
changed ways and forced Paypal to provide better guarantees, much like a bank,
then their cashflow would take a hit.

Good idea or am I off?

~~~
kogir
Amazon doesn't bill you until an item ships, even for third parties that sell
items through them. I've verified this on my credit card statement.

------
zackattack
PayPal recently pulled this stunt on me. While very frustrating at the time,
especially since there was no phone support available for the next 3 days due
to labor day weekend, at least now I have scanned copy of my Passport on my
computer.

~~~
rumpelstiltskin
can you elaborate on this passport issue? are you in a foreign country?

~~~
zackattack
no, but paypal wanted me to scan some form of identification to prove my
identity. since my driver's license is expired and i'm no longer living in
california, all i have is a paper driver's license that they mailed me, so i
use my passport for identification purposes. if i am ever traveling in a
foreign country in the future, it will be useful to have a digital copy of my
passport in case i lose it and have to deal with embassy issues. i have not
requested the dmv mail me a new driver's license since the picture was taken
when i'm 15 and the inevitable "you look so different!" conversations are
kinda lame

------
mkramlich
While on the face of it this sounds outrageous, it is probably a symptom of
PayPal's anti-fraud measures.

