PayPal has cut off VPN provider iPredator, an anonymity service launched by Pirate Bay co-founder Peter Sunde. The popular VPN provider is no longer allowed to accept payments and PayPal has frozen all funds for up to 180 days. PayPal didn't provide any details as to why iPredator was banned, but the action comes after their credit card processor stopped doing business with all VPN services.

PayPal is widely known for their aggressive stance towards BitTorrent sites, Usenet providers and file-hosting services, but a new development suggests that VPN providers can suffer the same fate too.

PayPal has stopped providing payment services to the Swedish based VPN provider iPredator. In addition, all the organization’s funds have been frozen. iPredator is commonly known as the “Pirate Bay” VPN as it was launched by the old Pirate Bay crew in 2009, but it’s currently operated by an independent non-profit foundation.

Ipredator and Pirate Bay founder Peter Sunde informs TorrentFreak that this disconnection came without prior warning and with no explanation from PayPal as to why the organization is no longer allowed to accept payments. PayPal simply stated that there is “an issue with the account.”

For Sunde and his team the disconnection comes at an unfortunate time. Just three weeks ago iPredator was also kicked out by its credit card payment processor Payson, who changed their terms of services and disallowed VPNs. Sunde believes that the two incidents are related.

“It’s not a coincidence that we are banned from Payson, and then PayPal a few weeks after,” he told TorrentFreak.

The iPredator team has tried to contact PayPal to get more information on the reason for the disconnection, but thus far without luck. The VPN provider still has to find a replacement for Payson as well, but to date have been unsuccessful.

Worryingly, one large European payment processor informed iPredator that they have been put on a blacklist of services that are not allowed to accept credit card payments.

“One processor we talked with, to replace Payson, told us that we were on a blacklist of services that are prohibited to accept credit cards. This apparently happened shortly after Payson announced it could no longer process MasterCard and Visa payments for VPN providers,” Sunde explains.

TorrentFreak has asked both MasterCard and Visa about the claims of an operational blacklist, but both companies denied one exists. However, Sunde believes that they are covering something up.

“It’s a sad day for democracy when third parties interfere with legal business, and then lie about it. This is typically something we hope someone leaks so we can see what they are morally censoring,” he adds.

Mastercard’s Senior Vice President of External Communications, Andrew Bowins, further said that they have no policy to ban VPN services, but that they occasionally disconnect merchants who violate their terms.

“We don’t currently have a policy that unilaterally prohibits VPNs or anonymizers. That said, in order to protect the integrity of the payment system and its participants, we do review merchants to determine whether their models are in compliance with our rules,” Bowins told TorrentFreak.

Neither MasterCard nor Visa could confirm that iPredator was allowed to process credit card payments. Several other payment processors and acquiring banks we contacted regarding the matter did not reply, and PayPal has offered no explanation for their decision either.

For Sunde and the rest of the iPredator team it’s this vagueness and lack of transparency that’s most frustrating. If they are for some reason banned, they would like to know on what grounds.

“If someone SAYS what it is, we can at least argue about it. With the enormous power they have accumulated, they are required to offer some transparency and responsibility,” Sunde tells us.

Without a response from PayPal we can only guess why iPredator is banned. Perhaps it’s their affiliation with the Pirate Bay, the fact that they operate a proxy, or because VPNs are starting to become tricky business. Truth is, we just don’t know.

Meanwhile, iPredator is now forced to go to the “dark corners” of the internet to find payment providers who are still willing to work with them. The VPN provider still has a few payment options left, including Bitcoin, and they hope that the public are willing to support them in during these tough times.