PayPal Freezes Campaign Funds

Posted by Brennan on September 5, 2013

[Update: PayPal have unfrozen the account, for now at least. Thank you for your support!]

Saturday August 31st I woke to two emails from PayPal. The first notified me they had cancelled the debit card associated with my sole proprietor business account, the second was informing me they placed a block on my account barring me from withdrawing or sending any money out of my PayPal account. I figured my account must have tripped an automatic security limit the night before. I logged into their website to see what actions I needed to do in order to remove the block on my account.

After 4 phone calls, the last of which I spoke to a supervisor, the understanding I have come to is, 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. A final email communication from PayPal reaffirmed us of their stance by stating:

"Please provide an itemized budget and your development goal dates for your project"

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.

Communications with PayPal have implied that they would use any excuse available to them to delay delivering as much of our cash as possible for as long as possible. Asking us to give them justification for such behavior is obviously not in our best interests. PayPal's position particularly ridiculous when contrasted with IndieGoGo's policy of transferring all funds to successful campaigns within 15 days of their conclusion. If IndieGoGo can do it, so can PayPal.

They just don't want to, and we cannot help but wonder why. Crowd funding is an adventure. It is thrilling to feel a community of supporters backing your project and giving you a sense of security that you'll be able to bring your vision to life over the course of the next year coupled with freedom to maintain your vision unbeholden to shareholders and 3rd parties. After going round and round on the phone with PayPal, I am left with the very strong feeling that this entrpreneurial freedom is in jeopardy. If PayPal has financial risks to mitigate, why is that specially true in our case? Are the risks larger because we are successful?

(Please see our latest IndieGoGo Campaign update for further details.)