After banning several of the largest file-hosting sites and Usenet providers, PayPal is now taking aim at a VPN/proxy service. The payment processor has just cut off the BitTorrent proxy provider GT Guard and frozen the company's funds. In an email PayPal's Brand Risk Management department explains that GT Guard's affiliation with BitTorrent is the reason for the drastic actions.

PayPal is widely known for their aggressive stance towards BitTorrent sites, Usenet providers and file-hosting services, and now this policy has also been actively applied to a VPN provider.

PayPal has stopped providing service to the Germany based VPN provider GT Guard. In addition, all the company’s funds have been frozen.

GT Guard is a relatively small provider with about 450 active users, 90% of whom pay through PayPal. The company targets BitTorrent users who use the VPN and proxy service to download anonymously while bypassing throttling Internet providers.

GT Guard’s owner Mike was taken by surprise by PayPal’s decision as he is merely providing an anonymizing service to his customers. Initially PayPal stated that GT Guard violated the terms of service because it linked to adult sites but later on its affiliation with BitTorrent became a problem.

In an email received yesterday, PayPal’s Brand Risk Management department explains that “file-sharing, BitTorrent and Usenet websites, as well as similar services, require prior approval from PayPal.”

This policy has been in force since last year and has resulted in PayPal banning many file-sharing related services. However, the same strict demands generally don’t apply to a VPN provider.

During a previous phone conversation GT Guard explained to the payment processor that they were merely offering security services. In addition, the VPN/proxy provider also offered PayPal full access to the VPN and proxy. However, none of the above changed PayPal’s position.

GT Guard’s owner tells TorrentFreak that he would like to continue the service but that payment issues will most likely result in an exodus of customers.

This is not the first time that PayPal has gone after a BitTorrent-friendly VPN provider. Last year TorGuard was also banned but after a careful review PayPal decided that this was a mistake and eventually restored service.

Whether the action against GT Guard represents the early stages of a new crackdown on privacy services or is simply an isolated incident remains to be seen.