Update: PayPal has contacted Ars Technica and informed us that it has released Mailpile's funding. PayPal's statement is below.

Mailpile is a crowdfunded e-mail client written by a small group of folks in Reykjavik, Iceland. The product aims to let users keep their mail local and under their own control rather than relying on Google, Microsoft, or another cloud e-mail provider, and it has an active Indiegogo campaign with six days left on the clock (disclosure: I'm a backer).

The crowdfunding campaign has exceeded its goal and things appeared to be going well for the company—until last weekend, when Mailpile's Brennan Novak awoke to a notification that PayPal was canceling his debit card and freezing his PayPal account, apparently on suspicion of fraudulent activity.

PayPal has a long and storied history of freezing money belonging to customers that it suspects of fraud (like Minecraft designer Markus "Notch" Persson) or that it nebulously accuses of failing to adhere to its terms of service (like WikiLeaks and Courage to Resist, an organization that supports convicted WikiLeaks leaker Chelsea Manning [formerly known as Bradley Manning]).

Novak contacted PayPal in an attempt to access the nearly $45,000 of contributions the payments giant had locked Mailpile out of, but was flatly told that PayPal would be keeping the funds frozen for a full year or until they have a verifiable 1.0 release of their product. Alternately, PayPal said, Mailpile could provide PayPal with "an itemized budget and your development goal dates" for the project.

It's unclear what options Mailpile has. In the US, PayPal is not considered a bank and operates under none of the legal constraints that apply to financial institutions. There is also the question of jurisdiction; Novak summarizes the issue thusly on Mailpile's blog:

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 [is] 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.

Unfortunately, Mailpile likely has a hard road ahead fighting through PayPal's notoriously obtuse and unresponsive "fraud" process—a process so broken that PayPal itself has acknowledged it's in need of "aggressive changes." If past freezes are any indication, the best way forward is almost certainly to abandon attempts at redress through customer service and simply make as much noise as possible in the press to get PayPal's upper management to take notice.

Ars contacted Mailpile to ask if PayPal has made any further offers of assistance, but according to Novak, it has not:

No, PayPal has been quite difficult and is asking for unreasonable private details about our business—it's all very strange. However, we have faith that we are in the right and will thus prevail. Afterwards I will be deleting my PayPal account and never looking back.

Update: PayPal has notified Ars Technica via phone and e-mail that it has released Mailpile's crowdsourced funding, and it is working on modifying its oversight procedures to better cope with crowdfunding. Here is the company's full statement:

We have reached out to MailPile and the limitation has been lifted. Supporting crowd funding campaigns is an exciting new part of our business.We are working closely with industry-leaders like IndieGoGo and adapting our processes and policies to better serve the innovative companies that are relying on PayPal and crowd funding campaigns to grow their businesses. We never want to get in the way of innovation, but as a global payments company we must ensure the payments flowing through our system around the world are in compliance with laws and regulations. We understand that the way in which we are complying to these rules can be frustrating in some cases and we've made significant changes in North America to adapt to the unique needs of crowd funding campaigns. We are currently working to roll these improvements out around the world.

Ars will be meeting with a PayPal spokesperson later today to discuss the matter further.