PayPal is widely known for their aggressive stance towards BitTorrent sites and file-sharing services, and this policy has now been extended to VPN providers. TorGuard, a company that offers VPN and proxy services, has been banned from using the payment processor because of its affiliation with "BitTorrent." As a result, thousands of dollars belonging to the company have been frozen.

In response to new Internet surveillance initiatives there is a growing interest in privacy enhancing services such as VPNs and proxies.

TorGuard is one of the many companies catering to this demand. As the name suggests, TorGuard has several plans specifically targeted at BitTorrent users who prefer to hide their IP-addresses from the rest of the world.

Being a BitTorrent-friendly VPN appeals to a wide audience. However, the company has also learned that it has a downside. Without prior warning or detailed explanation, PayPal decided to ban TorGuard for promoting their services to BitTorrent users.

The following email was sent by PayPal.

“When we reviewed your account, we noticed that your activity violates some of the agreements you have with us. Because of this, we’ve limited your accounts and can no longer offer our services to you. You’ll still be able to log in to view your transaction history, but you won’t be able to send or receive money.”

Because the email didn’t explain what agreements had been violated, TorGuard’s owner Jason decided to call the company for an explanation. But instead of helping him to resolve the issue, PayPal informed him that the account would remain closed.

“It wasn’t until I called PayPal and spoke with a business account rep that they explained PayPal doesn’t allow promotion of ‘torrent trackers’,” Jason told TorrentFreak.

“After arguing with the representative that we fall in the category of a hosting service they assured me the decision had already been made and nothing further could be done.”

Apparently, PayPal is going down the same route as Apple, where everything related to BitTorrent is simply a no-go. Over the past years the payment processor has already thrown out many cyberlockers and BitTorrent trackers that linked to infringing content, but to our knowledge this is the first time that a VPN service has been banned.

Needless to say, PayPal’s decision has resulted in quite a few hassles for the VPN service.

“They canceled hundreds of automatic payments and froze thousands in our account,” Jason told TorrentFreak.

“We can’t even issue refunds unless the buyer disputes the charge. Most of our clients have been very patient since almost everyone has been wronged by PayPal at some time or another,” he added.

PayPal’s aversion to BitTorrent comes after the entertainment industries repeatedly called on payment processors to take responsibility for their connections to online piracy and counterfeiting. While this is probably justified when a store is selling knock-off products, banning a VPN goes rather too far.

Despite the setback, business continues as usual for TorGuard. They have launched a new portable OpenVPN client for Windows, and a Mac and Linux version is coming soon. As for the payments, the company has plenty of alternatives available.

“We still accept all forms of credit card, Google checkout and couple of other secure wallet services. It’s ironic to use PayPal when buying a VPN/proxy anyway, they have a proven track record exploiting user’s financial info.”

“Those who are serious about private payment solutions should consider one of the many alternatives like Prepaid VISA cards, OKPAY, Bitcoins, and other ewallet services,” Jason concludes.

Update: Paypal restored TorGuard’s account after three weeks.

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Disclaimer: TorGuard is one of TorrentFreak’s sponsors.