PayPal Temporarily Freezes Skull Girls Developer's Account on 'Chargeback' Fears

April 23, 2013 -

Like a few other game developers who have crowdsourced a project or made a lot of money through PayPal transactions, Skullgirls developer Lab Zero Games found themselves unable to pay employees during the weekend because the online money transfer service froze the developer's account. According to several posts from CEO Peter Bartholow on NeoGAF, Paypal froze its account in anticipation of a large number of chargeback requests related to its recent Indiegogo crowdfunding campaign to add new characters to the game as DLC.

"PayPal's freeze on our account is making it so that I can't pay people today," he wrote. "I sent them all the documentation they asked for last night, hoping it would be resolved today, but didn't hear anything back," he added. "I also immediately filed a complaint with the [Consumer Financial Protection Bureau] because this whole thing seems decidedly non-kosher."

Bartholow also said that he spoke to the team at inXile, who told him that backing through Amazon Payments had "no similar issues, despite dumping several times the amount we have into their bank accounts."

PayPal also asked Lab Zero to shoulder the risk of charge-backs, but Bartholow declined and they froze the account.

"They also asked if we're good for the $700,000 if something goes wrong," he wrote. "I said 'No,' because, well we're not? The whole point of crowdfunding is to give us the money to develop stuff, not take out a loan."

While PayPal finally unfroze the account, it kept $35,000 "as collateral," says Bartholow.

Source: NeoGAF


Comments

Re: PayPal Temporarily Freezes Skull Girls Developer's ...

If you're using PayPal you shouldn't be surprised by this... they do stuf like that all the time after all.

http://en.cubadebate.cu/news/2011/08/04/paypal-and-ebay-impose-blockade-...

Re: PayPal Temporarily Freezes Skull Girls Developer's ...

There was a time that they were even worse about it. I think about ten years ago, they developed a habit of simply removing money from accounts that showed unusual changes in activity (like suddenly receiving a lot of sales after getting a tiny trickle of preorders). The process of getting the money back was almost impossible, and it typically took lawsuits - not all of which were successful.

They argued for quite a while they weren't a bank, clearing house,  payment processor, or any preexisting type of financial institution, so they weren't subject to regulations in place that stop all those companies from doing the same thing.

Re: PayPal Temporarily Freezes Skull Girls Developer's ...

Yep. This is one of the reasons why people should avoid Paypal if at all possible. Unfortunately, Paypal has the most world wide reach of any payment provider and it is hard to avoid if you want the widest possible reach.

Re: PayPal Temporarily Freezes Skull Girls Developer's ...

And in many cases they have inked exclusive (or near exclusive) deals with other scum sucking companies (I'm looking at you, etsy and ebay....) which makes them even harder to avoid.

Sadly, like the credit card processors, the chances of them being realed in is pretty low.. they are just too useful as a tool for shutting down groups people do not like but could never legally go after... thus there is a significant 'moral' wink and nod between them and the fed.

 
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