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On Nov. 12, the rapper/hoverboard merchant Soulja Boy wrote an email to the support staff of Stripe, a major online payment processing company. He was concerned about a large negative balance on his account, which he had used to process payments for the two-wheeled self-balancing scooters he sold for $1,500 on an online store under the name "Souljaboard." "I need help all the payments are fraud," Soulja Boy wrote. "And it sent my account to negative because they all say they weren't authorized. please help in any way you can thanks. I don't want to have to pay all this money because of frauds is there any way to reverse these payments and get my account to Good standing." The email was the culmination of a three-month struggle between the rapper and Stripe over the issue of "chargebacks": processed credit card orders that are subsequently disputed by the cardholder, for which internet merchants are typically held responsible. The reasons someone may dispute an internet purchase vary, but fraud — someone using stolen credit card information — is among the most common. According to internal Stripe documents obtained by BuzzFeed News, online hoverboard purchases are plagued by fraud. The issue is not limited to Souljaboards. As many as three-quarters of all purchases from some hoverboard merchants result in chargebacks. (According to a Stripe company source who wished to remain anonymous, a typical chargeback rate is 1%.) Furthermore, according to documents reviewed by BuzzFeed News, some cards have been used to fraudulently purchase hoverboards from multiple merchants. The issue has become so bad that, according to an account postmortem — an unsigned six-page document that outlines "Remediations" and "Next Steps" — Stripe considered suing its users to recoup funds. "We need to be willing to file a lawsuit," the postmortem reads. "At what point are we actually willing to file a lawsuit? There's a reputation/PR issue here since we still would be suing a user."

Payment processing services like Stripe act as go-betweens for merchants and credit card companies. When a customer buys a product online, the credit card company passes the charge on to the payment processor, which puts the money in the merchant's bank account. If a cardholder disputes a charge and the credit card company agrees to a refund, the payment processor is obligated to refund the credit card company with money that is sometimes debited from the original merchant's account. That's a problem for the merchant, who is out the cost of the board as well as the cost of shipping and is still liable for the fraudulent charge. With enough disputes, merchants can easily go into the red — which is what happened with at least three online hoverboard vendors. Stripe responded to BuzzFeed News' request for comment in a statement: "We can't comment on the financial details of particular Stripe accounts for privacy reasons. Generally speaking, credit card network require merchants to limit disputed transactions to less than 1%. If a merchant's dispute rate is above that threshold, card networks can and do enforce their limit by levying fines and, in some serious cases, refusing to allow the merchant to continue accepting credit cards at all." Documents show that as of Dec. 7, Soulja Boy's Stripe account held a balance of $-174,440.08. Between June 30, 2015, and Dec. 7, according to the same documents, more than 75% of all orders associated with that account were disputed after the fact. In an Oct. 19 email, Stripe support told Soulja Boy, "The vast majority of your negative balance is due to fraud." Soulja Boy did sell goods other than hoverboards on his store, including shirts and caps, but several facts suggest that hoverboard sales constituted most of the sales, and most of the fraud. First, the average size of an individual sale in that time period was nearly $1,300 — items on Soulja Boy's store other than the Souljaboard ranged from $25–100. Second, the 75% of disputed orders accounted for 91% of the total amount of sales — meaning items from disputed orders were significantly more expensive than orders from non-disputed ones. Soulja Boy isn't alone. IO Hawk, perhaps the best-known hoverboard brand in the U.S., currently holds a negative balance of more than $900,000 with Stripe. In a company history of the since-disabled account, a picture emerges of a merchant struggling to cope with the sudden surge in interest in its product, legitimate and otherwise. According to Stripe documentation, John Soibatian registered a GoDaddy page in November 2014 to sell hoverboards. (GoDaddy uses Stripe as its credit card payment processor.) Orders for IO Hawk skyrocketed after a Today show appearance in May 2015, and so too, according to the postmortem, did fraud. In mid-June, representatives from Wells Fargo, which underwrites transactions handled by Stripe, contacted the payment company to alert them to an increase in fraudulent transactions associated with the IO Hawk account. This was the first of a series of warnings from Wells Fargo, which led Stripe to send an internal memo on July 10: "Wells Fargo is extremely concerned about the extent of this fraud and corresponding reputational damage. We anticipate that we may be contacted by the Card Brands (and possibly other regulatory bodies and/or law enforcement agencies) to explain this activity and want to have a solid understanding of what has occurred." By that point, Stripe had disabled the IO Hawk account. "Smart Wheels processed over $2,000,000 in orders, many of which we believe were fraudulent," an internal account timeline reads. "Once the business' dispute volume exceed the value of incoming charges, [the payment company] began sending debits to recover the negative balance." At first, Stripe was able to recover some of the balance through these debits, but according to Stripe documents, the IO Hawk account holder subsequently blocked debits from its bank account. All in all, IO Hawk payments processed by Stripe later incurred more than $1.5 million dollars in chargebacks — nearly 58% of its business with Stripe — of which IO Hawk still owes more than $900,000. On the Stripe internal management system, IO Hawk is now flagged as "unreputable" and described in an attached note as "one of our largest losses ever, merchant was not suited to run a business of this size and with such a risky product." Neither Soulja Boy nor Soibatian responded to emails, phone calls, or texts for comment.

Frederic J. Brown / AFP / Getty Images IO Hawk