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September 20, 2013 11:37 AM   Subscribe

PayPal locked down the developer’s account, and said it could only have 50% of the funds. The rest would be released as development continued, based on PayPal’s assessment of the situation. PayPal was, essentially, going to become a producer going forward. Crowdfunding's Secret Enemy is PayPal
posted by East Manitoba Regional Junior Kabaddi Champion '94 (73 comments total) 16 users marked this as a favorite

 
PayPal is scum. I don't know how they managed to work their way into a legal limbo where they can seize tens of thousands of dollars from customers for no reason without fear of anything other than bad PR, but their lawyers should be given medals, and then strangled with them.
posted by Holy Zarquon's Singing Fish at 11:47 AM on September 20, 2013 [50 favorites]


PayPal is being awful as usual, but I wonder if they have somewhat of a point with chargebacks. A lot of people don't really understand crowdfunding and I can imagine a situation where the project fails and a large number of people issue a chargeback with their credit card, leaving PayPal holding the bag.

People don't understand that when you participate in crowdfunding, there is a real risk that the project will fail and you will get nothing.
posted by zixyer at 11:48 AM on September 20, 2013 [4 favorites]


See, this is why people support attempts to bring PayPal within the realm of traditional banking regulations. A bank can't put a hold on your funds unless there is some concrete problem, e.g., a court order, waiting for a transaction to clear, pre-authorized debits, etc. They simply cannot say "Yeah, you can have some of this money now and some later. If we feel like it. Because Reasons." Completely illegal.

How PayPal has managed to maintain its regulatory status as a "payment processor" is beyond me. This shit is ridiculous.
posted by valkyryn at 11:48 AM on September 20, 2013 [34 favorites]


I don't know how secret it is; basically the only time you ever hear about PayPal now is when they're making life miserable for somebody who's trying to do something interesting.

I like the way the PayPal Corpcomm flack says "We are working closely with industry-leaders like IndieGoGo and adapting our processes and policies..." as though they actually have any; the fact that they haven't yet been fixed is prima facie evidence that they're either entirely abritray, or don't exist at all.
posted by mhoye at 11:49 AM on September 20, 2013


Does Amazin do anything like this? TBH from a lot of the complaints about Kickstarter projects I've heard recently there's probably a sizable contingent of people who wish it did.
posted by Artw at 11:50 AM on September 20, 2013


How PayPal has managed to maintain its regulatory status as a "payment processor" is beyond me.

CNet, 2002:
In an advisory letter sent last month to PayPal concerning its use of customers' funds, the Federal Deposit Insurance Corporation said it does not consider the company to be a bank or savings association because it does not accept deposits as defined by federal law, which requires institutions to have a banking charter. PayPal doesn't have a charter, thus it is not a bank, the FDIC said.
This shit is ridiculous.

Agreed. And it has been for over a decade.
posted by filthy light thief at 11:54 AM on September 20, 2013 [6 favorites]


I'm hoping my policy of never using Paypal for funding Kickstarter stuff means I'm not contributing to the problem, but now I wonder about Amazon and Google as "payment processors". Nthing that Paypal is like an unchartered bank and should be regulated.
posted by immlass at 11:54 AM on September 20, 2013 [1 favorite]


Does Amazin do anything like this?

Not at the moment, according to the article. Amazon Payments is the backend for Kickstarter, and no one has reported problems over there.
posted by valkyryn at 11:54 AM on September 20, 2013 [1 favorite]


Crowdfunding's secret enemy is people running crowdfunding projects who say "I need $500,000 to do this project" and get $500,000 and start working on the project and then stop communicating with the backers for six months and then one day say "so we ran out of money and all we have done is this crappy sketch of what we actually planned to create, will you give us more money?"

Yea, CLANG, you suck.
posted by jacalata at 11:55 AM on September 20, 2013 [11 favorites]


How PayPal has managed to maintain its regulatory status as a "payment processor" is beyond me.

Possibly by virtue of being a shade less incompetent than Global Payments?
posted by flabdablet at 11:56 AM on September 20, 2013


I wonder if they have somewhat of a point with chargebacks. A lot of people don't really understand crowdfunding and I can imagine a situation where the project fails and a large number of people issue a chargeback with their credit card, leaving PayPal holding the bag.

Bullshit. Such a chargeback would be untenable given the terms of the crowdfunding agreement, and it is not PayPal's place to alter terms to spare themselves the anticipated inconvenience.

That, of course, would be the diplomatic outlook on what they're doing. The cynical (and probably correct) view is that they're just sitting on the cash to earn interest and leverage against other liabilities. Which should be criminal.
posted by 7segment at 11:58 AM on September 20, 2013 [1 favorite]


Well, if I were to get into unregulated money handling, and were a unconscionable dick, I would find all sorts of "security" and "antifraud" issues just so I could hold on to that sweet, sweet cash a little longer for interest and investment. So, most importantly I would make it very difficult to find the shrinkwrap T&C's (that would most likely be in a constant state of flux) as I found new loopholes and make it equally difficult to reach the 10 binder monkey customer service people because "we are rearchitecting our customer services infrastructure to create new synergies with our customers".

What? That was just a what-if. You're acting like someone actually does this...
posted by Samizdata at 11:59 AM on September 20, 2013 [4 favorites]


People don't understand that when you participate in crowdfunding, there is a real risk that the project will fail and you will get nothing.

Kickstarter advises people to ask for refunds if projects do not deliver on rewards and says, explicitly, that project starters have a legal obligation to fulfill their rewards.
Yes. Kickstarter's Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill.
They don't explicitly say "issue chargebacks", but I can see how it's pretty clearly implied that if I don't get my rewards, I should get my money back.
posted by muddgirl at 12:06 PM on September 20, 2013 [4 favorites]


Kickstarter advises people to ask for refunds if projects do not deliver on rewards

Note that Kickstarter makes a big distinction between failing to provide individual rewards you promised individuals for pledging and failing to finish the project you're trying to kickstart. (But that difference may be moot if one of the rewards offered was "a copy of the thing we're trying to make.")
posted by straight at 12:10 PM on September 20, 2013 [2 favorites]


They don't explicitly say "issue chargebacks", but I can see how it's pretty clearly implied that if I don't get my rewards, I should get my money back.

Well, doesn't that kind of vindicate PayPal? I know Kickstarter doesn't use PayPal, but if other crowdfunding sites have the same stipulation in their terms of use, a chargeback if the project isn't completed would be valid and the credit card company would allow it to go through.
posted by zixyer at 12:10 PM on September 20, 2013


Markus "Notch" Persson, developer of runaway indie success Minecraft, also almost had his money confiscated by PayPal.
posted by Harald74 at 12:12 PM on September 20, 2013 [2 favorites]


They don't explicitly say "issue chargebacks", but I can see how it's pretty clearly implied that if I don't get my rewards, I should get my money back.

Yeah, chargebacks aren't the same thing as refunds. They look the same in practical terms, but there's a difference on the processing side.
posted by valkyryn at 12:14 PM on September 20, 2013


How PayPal has managed to maintain its regulatory status as a "payment processor" is beyond me.

Some of this stuff, like occasional delays and freezes on big amounts while they figure out what is going on, probably flows out of being a natural target for every scammer under the sun. But when you get to them wanting to be a "producer" and other ridiculous and inconsistent behaviour it's far harder to defend them that way.
posted by Artw at 12:22 PM on September 20, 2013 [1 favorite]


Yes, chargebacks get handled very differently from refunds, and chargebacks are huge red marks against a retailer.

However, I've never heard of a legit payment processor that will accept money and then not disburse it to the retailer "for safekeeping". If there's too many chargebacks then they'll simply not process business for you.

Of course the main problem is really that Paypay is a fucking bank and somehow they get away with not being classified as one by the FDIC.
posted by kmz at 12:22 PM on September 20, 2013


Paypal is awful to deal with, but I don't envy them their position as the bulwark between credit card companies, who take chargebacks seriously, and Internet buttholes who will commit fraud online that would be unthinkable to commit if you actually had to talk to somebody face to face to make it happen.

If you buy a milkshake through PayPal with a credit card, and then say "That TOTALLY wasn't legit. I want that money back even though I already drank the milkshake I mean there was no milkshake that wasn't me it was a thief or something." the credit card company says "Okay, here ya go" and then charges PayPal for it. And then PayPal charges the milkshake seller for it. And now the seller has lost a milkshake, a sale, and however much the fees for chargebacks are, plus PayPal's markup for processing it.

PayPal has gotten more and more aggressive over the years about preventing chargebacks. While the chargeback process is there to protect customers, it is constantly being abused in a way that screws over everybody involved except the abuser. So when PayPal sees something they expect is gonna generate a bunch of chargebacks, they do this kind of nonsense. But it's not as simple as "Don't do that," because the problem they're trying to address is actually a real problem.

The root of the problem, I think, is people who abuse the credit card system, which is a system designed first for convenience and second for security. Or, I guess, first for credit card company profit, second for convenience, and third for security.
posted by Jick at 12:22 PM on September 20, 2013 [14 favorites]


Well, doesn't that kind of vindicate PayPal?

Yeah, a bit in my mind. I know that PayPal is evil (aka a business) but it was hard for me to parse, from this article, what specific evil things they did in this case. They don't want spammers raising millions of dollars, running off with it, and leaving them holding the bag. They have shitty customer service, and a "shoot first, ask questions later" approach to doing business, and if I were a content producer I'd probably avoid them, but "don't run away with all the cash from your kickstarter and screw out your donators" seems like a worthy thing for Paypal to ensure.

Yeah, chargebacks aren't the same thing as refunds. They look the same in practical terms, but there's a difference on the processing side.

Let's talk practical terms, then. If I donate to a crowdfunded project hosted on a site that uses paypal, and whose terms of service require that I get either a reward or a refund, and the project creator refuses to send me either a reward or a refund, do I have the right to ask for a chargeback? And if I do, does Paypal then have a responsibility to protect their own interests when it comes to chargebacks?
posted by muddgirl at 12:24 PM on September 20, 2013


the credit card company says "Okay, here ya go" and then charges PayPal for it.

That was not my experience the time I asked for a chargeback, but I suppose mileages may vary.
posted by muddgirl at 12:24 PM on September 20, 2013


They don't want spammers raising millions of dollars, running off with it, and leaving them holding the bag. They have shitty customer service, and a "shoot first, ask questions later" approach to doing business, and if I were a content producer I'd probably avoid them, but "don't run away with all the cash from your kickstarter and screw out your donators" seems like a worthy thing for Paypal to ensure.

But keeping some or all of a developer's production budget and requiring them to convince you personally that the developer is not only legit but on track to produce a "good" product by PayPal's estimation isn't helping anything. They told the Dreamfall devs that they'd get their development money after they finished the game, for Pete's sake.
posted by Holy Zarquon's Singing Fish at 12:30 PM on September 20, 2013


Amazon Payments is the backend for Kickstarter, and no one has reported problems over there.

Curious, that.

Of course, the fact that Kickstarter uses Amazon instead of Paypal is what tipped me over the fence into supporting KS projects.
posted by ChurchHatesTucker at 12:31 PM on September 20, 2013


jacalata: "Crowdfunding's secret enemy is people running crowdfunding projects who say "I need $500,000 to do this project" and get $500,000 and start working on the project and then stop communicating with the backers for six months and then one day say "so we ran out of money and all we have done is this crappy sketch of what we actually planned to create, will you give us more money?"

Yea, CLANG, you suck.
"

That would be the Neil Stephenson sword fighting game then?
posted by Samizdata at 12:33 PM on September 20, 2013


Qualified defense of PayPal here. I used to work for eBay (a PayPal company*), and know a lot of folks who have helped build the guts of PayPal at various times.

Payments are hard. And it's not "one brilliant idea to solve" hard. It's messy detail after messy detail hard. Financial institutions are hard to deal with. Regulations vary from state to state, country to country. How people actually pay for things varies hugely. It's money, so you really can't screw up and lose things. You have to deal with law enforcement a lot. There's fraud, money laundering, ID theft, etc. etc. etc.

The reason PayPal has been successful so far is that it's really, really hard to build up the expertise and code to deal with all these things. A few other folks have: the credit cards and financial institutions (though they have their own problems). Google has tried over and over again but isn't really there. Amazon is mostly there. Square might get there. But most folks just can't compete.

Much of their bad press comes from basically the same issue. There's some donation button or Indiegogo thing or whatever, and suddenly what was a pretty normal account has scads of money pouring in. This sets off all the alarm bells ever, since that's also what all sorts of money laundering / theft / fraud / etc. situations look like. They put a hold on things, just like when you use your credit card for something expensive in a country your CC provider didn't expect. They try to figure out what's really going on. They fail, people get mad. It is a genuinely hard problem.

Now here's where my qualified defense ends. It's not a new problem. It's been happening for years. They have to apologize over and over for it. They need to figure out how to handle this stuff fairly and quickly. It's probably some combination of better internal policy, better customer support, and a better ability to detect the difference between sudden unexpected influxes of money and fraud/abuse. If they don't, one of their competitors (Amazon!) will eat their lunch.

* That's a joke that's probably only funny to eBay employees of a certain vintage.
posted by feckless at 12:48 PM on September 20, 2013 [13 favorites]


Paypal is awful to deal with, but I don't envy them their position as the bulwark between credit card companies, who take chargebacks seriously, and Internet buttholes who will commit fraud online that would be unthinkable to commit if you actually had to talk to somebody face to face to make it happen.

The only reason it's possible to scam people with PayPal is because they've set themselves up as this weird, hybrid sort of entity. It looks and acts like a bank, but it's technically a "payment processor," so you end up with sort of the worst of both worlds. Traditional payment processors require you to have a bank account into which payments are deposited. PayPal basically lets you stick the money with them--introducing an extra layer of complexity--before sending it to a "real" account.

When it was first introduced, the service was revolutionary. These days, with the advent of online banking and credit-card processors that accept consumers as clients, they no longer really serve any terribly useful purpose. It's sheer momentum. There's nothing you can do with PayPal that you can't do with a traditional card processor plus a commercial bank, both of which fall squarely within existing regulatory categories.
posted by valkyryn at 12:53 PM on September 20, 2013 [2 favorites]


oh damn, i hadn't heard about clang. that's so shitty. when i read about the project i will admit that my first reactions were "AWESOME" followed by "but do they have a company who has agreed to publish/distribute? and how are they going to fix the needs a purpose built controller issue?" - upon not finding answers for that i opted to not throw my money in the ring. i'm not terribly surprised at the hurdles they've encountered, but i am surprised they're acting surprised about it.
posted by nadawi at 1:02 PM on September 20, 2013


Crowdfunding's secret enemy is people running crowdfunding projects who say "I need $500,000 to do this project" and get $500,000 and start working on the project and then stop communicating with the backers for six months and then one day say "so we ran out of money and all we have done is this crappy sketch of what we actually planned to create, will you give us more money?"

I followed that project pretty closely, and the Kickstarter promised an Alpha release, which we got. It sucks that they haven't yet managed to use that Alpha to raise however many millions it takes to make an entire game engine designed for realistic sword combat (because you can't just license something from Valve or id - you gotta make your own), but they delivered all that they promised.
posted by zippy at 1:08 PM on September 20, 2013 [1 favorite]


Honestly, while PayPal is grossly overstepping its grounds, stuff like Clang is just going to get consumers on their side. It's the age-old "order vs. liberty" issue.
posted by Apocryphon at 1:10 PM on September 20, 2013


I don't understand why anyone seeing up anything new today would use PayPal. Forget their vendor-hostile policies about holding money, the user experience on the site sucks. Do you really want your customers seeing adds for unrelated PayPal products whenever they try to pay you?

The KickStarter / Clang stuff is a derail to the PayPal discussion, but man is Clang a catastrophe. The developers are trying to keep $526,125 of people's money by claiming that shipping a playable demo counts as shipping the promised game.
posted by Nelson at 1:18 PM on September 20, 2013


PayPal's so terrible I've thought about asking for freelance payments in bitcoin.
posted by klangklangston at 1:26 PM on September 20, 2013 [1 favorite]


(And they totally fucked my dad once on an eBay laptop sale that turned into an international fraud case. They can pretty much die in a fire.)
posted by klangklangston at 1:27 PM on September 20, 2013 [1 favorite]


I don't understand why anyone setting up anything new today would use PayPal. Course you, autocorrect.
posted by Nelson at 1:29 PM on September 20, 2013


I apologize if bringing up Kickstarter was a derail - Indiegogo has similar, but slightly more vague, rules about fulfilling campaign perks:
To fulfill all Perks and to respond promptly to all questions and comments regarding Perks. If you are unable to fulfill a Perk, you will work with the Contributor(s) to reach a mutually satisfactory resolution which may include, without limitation, issuing a refund promptly.
That language seems to negate the issue of chargebacks, because a chargeback is rarely mutually satisfactory. But as a consumer, this doesn't really leave me a lot of options when projects go wrong.
posted by muddgirl at 1:31 PM on September 20, 2013


That's from the Indiegogo Terms of Service.
posted by muddgirl at 1:32 PM on September 20, 2013


PayPal also froze their part of Mailpile's crowdfunding recently, on a similarly dubious pretext. At the time I thought it may have been some kind of NSA-led pressure (after all, it'd be a virtual cyber-Pearl Harbor if potential terrorists—i.e., you and me— started seeing strongly encrypted self-hosted webmail as reliable and stopped using surveillance-compliant webmail services), but now it seems like it's the standard PayPal jackassery.
posted by acb at 1:35 PM on September 20, 2013


That would be the Neil Stephenson sword fighting game then?

I suspect many of the people who donated to that were just giving them a tip for making such an entertaining Kickstarter video. Reading between the lines of their recent update, that may actually be true.
posted by straight at 1:51 PM on September 20, 2013


The KickStarter / Clang stuff is a derail to the PayPal discussion

I don't know if it is - I think they are all symptoms of the same problem, that you have consumers 'giving' people money for what they regularly think is a clearly defined 'purchase', regardless of how hard Kickstarter/etc push 'you're not buying from a store', and then the proposed item not coming through. I'd like to know more about the difference between Amazon Payments and Paypal, and why Amazon doesn't seem to do this kind of thing, and I'd love to get actual data on how many people try and get refunds for crowdsourced projects and how many send chargebacks, but nobody on the project/organisation side has the motivation to share this data.

And CLANG is either a great example of a project that failed to deliver what it promised, or a great example of a project that ambiguously appeared to promise something it never intended, because a lot of the people I know who funded ir (I didn't, to be clear) thought they were giving $40 for a working game they could play just like one they bought at EB (hardware not included - so many of them bought the recommended controller which now isn't going to be used, and are pissed about that too). You could find other examples, but this is just the most recent high profile one.
posted by jacalata at 1:55 PM on September 20, 2013 [1 favorite]


That CLANG situation is really interesting. On one hand, who thought $500,000 would be enough to develop a game that includes hardware? I mean, maybe for 2-5 dedicated individuals willing to live on scraps for a few years, but that was presented as a business like development effort.

Meanwhile, they got to their half million in 30 days, so there probably wouldn't have been much trouble raising another million. So, either the core motivators of the project (Stephenson, presumably, others too?) lost interest, or it became super obvious that they were more than an order of magnitude off in their cost estimates.

Paypal in general.. I'm sorry, I don't buy that payment processing is so hard. What is hard is being all things to all people. eBay wants to become as trustworthy and simple to use as Wallmart, so they have all this fraud protection built in. Fraud protection is supper expensive and difficult for Visa, let alone a company that was originally built on a peer to peer model, where trust was supposed to be based on reputation and not legal guarantees. Fact is eBay used their market monopoly to force competing successful payment processing companies out of business, and then to make sure nobody else could become established.

It might be hard to be the company Paypal is trying to be, but the world would be much better off with 20 specialist payment processors than one monopolist one, and I bet those 20 specialist jobs are all fairly easy to do in isolation.
posted by Chuckles at 1:56 PM on September 20, 2013 [1 favorite]


Well, doesn't that kind of vindicate PayPal? I know Kickstarter doesn't use PayPal, but if other crowdfunding sites have the same stipulation in their terms of use, a chargeback if the project isn't completed would be valid and the credit card company would allow it to go through.

No. One of the problems is it's not clear WHEN a refund should be issued. If a game is under production but they miss the original release date, does that count as failing to deliver? What if the game's scope changes drastically, and it's no longer what you intended to back? So it's not like most chargeback situations, where you paid for a product, expected it by a certain date not far in the future, and the store did not deliver as promised. In fact, Kickstarter has said in the past that you should NOT consider Kickstarter a store. The relationship between funder and creator is different than that between consumer and store.

It's also not the same because, if I understand correctly (admittedly I'm not well read on this) chargebacks happen AFTER money changes hands. As in, the store already has your money, and now has to return it to you via the credit card issuer. PayPal, on the other hand, is taking a radical approach: the project creator gets NO money until PayPal is convinced the project is legit, and then it dispenses money according to its own schedule and whims. It's more like an escrow transaction than a credit card transaction in that sense.

Additionally, I don't think credit card companies are in the business of messing with other people's businesses. If PayPal is indeed telling people they can't have money until PayPal does its due diligence—and that they can only get a regular allowance with conditions, not all the money at once, PayPal has essentially become a stakeholder in or controller of that person's business. This feels like a more invasive relationship than, say, PayPal refusing to work with porn websites because they've decided to avoid adult businesses altogether.
posted by chrominance at 2:49 PM on September 20, 2013


valkyryn: "How PayPal has managed to maintain its regulatory status as a "payment processor" is beyond me. This shit is ridiculous."

I wonder if we can have some form of secondary or tertiary status that deals with the new systems that are arising (and paypal is just one of them, of course). Things that allow for certain nimbleness and flexibility that can reduce some overhead of traditional payment processors while at the same time, enforcing concrete mechanisms to deal with the flaws that have been shown to happen with systems like paypal.

With the current dumbshits in office in the US, I certainly won't be holding my breath for any responsible solution to the situation (if it's ever even addressed at all), the most I can see happening is more regulatory capture and the banks/credit card companies, just buy shit out and get bigger, reducing the competition that should be happening with a better framework, and just making it harder to get in the game than it already is.
posted by symbioid at 2:59 PM on September 20, 2013 [1 favorite]


It blows my goddamn mind how much paypal sucks. Even at the smallest scale it sucks the maximum amount.

So i received two payments for things i sold on the same day. For about the same amount. Later on i get a message from one of the people saying "hey, the disk drive on this laptop was broken and the ad said it worked, can i get a refund for the cost of a new disk drive?" Yea, that's totally reasonable, sure dude.

So i go in to my paypal interface(because at the time, you couldn't issue refunds from ebay that i could see. you had to login to paypal and go do it there). Find the one that looks right, but neither one links to the actual auction anywhere.

I end up refunding the wrong person like $35.

I realize this almost immediately and call paypal. Now with any normal payment system there's some sort of way to reverse a payment that was just made if it was made in error. And this counted as a payment, a fee was deducted and everything even though it was a refund.

I battle it out with paypal, and then ebay support and get nowhere. They literally tell me to send the person a message saying it was a mistake and hope they're a nice goody two shoes who refunds me. Seriously. They said they'd maybe help me in a week if they hadn't(they literally used the word maybe, too)

Then it dawned on me, like i think about this case of paypal holding the money being about the money(in the sense that that's a lot of money, and they're sitting there collecting interest on it). If they reversed my payment they'd get no fee. If i send an erroneous payment, and the other person sends one back to me to undo it... that's two fees. They were being condescending and weird to me over the phone saying they literally didn't even have the option of reversing or even freezing payments(which is obviously horseshit) over what, $4 in fees? it must be company policy drilled in to the reps to avoid doing anything that will jeopardize those fees unless it's absolutely impossible.

Scummy fucking sacks of shit.
posted by emptythought at 3:17 PM on September 20, 2013


I don't, to be honest, think Clang's problem is that $500k couldn't buy them a fully functioning game with hardware. It's that with $500k, they couldn't get themselves organized well enough to set themselves up to acquire another few million dollars from the sort of people who back video games with millions of dollars and not their pocket money. Too many places right now are acting like Kickstarter is supposed to replace, like, investment. At some point, guys, people are going to want equity, not stickers.

At the same time, a chargeback is a HUGELY different thing from a refund. But if Paypal thinks some things are at higher risk of that, they should charge higher fees, not randomly refuse to hand over funds, just like all the merchant services people do.
posted by Sequence at 3:21 PM on September 20, 2013 [1 favorite]


emptythought: "I end up refunding the wrong person like $35.

I realize this almost immediately and call paypal. Now with any normal payment system there's some sort of way to reverse a payment that was just made if it was made in error.
"
For a bank transfer here - nope. You've just gotta hope the other guy is willing to send it back, or duke it out in court.
posted by brokkr at 3:43 PM on September 20, 2013 [2 favorites]


It just strikes me as a really shitty double standard that if the person who sent the initial payment disputed it, there's absolutely some button the support rep can push to reverse it. But in my case, nope.

They were literally saying they didn't even have the ability in their system to reverse it, which is just scummy. And afterall, they aren't a bank. This isn't some ach system thing. It's the internet, and they designed the system themselves.

They're like that little kid whose nintendo would "freeze" because he kicked it if he didn't get to use the purple controller on player 1. Do you get what i'm saying here? All of these situations have that thread in common.
posted by emptythought at 3:51 PM on September 20, 2013


I use PayPal despite the fact that they suck because back when I set up the tip jar in 2003 they were pretty much the only option, and in most cases they're still the only practical option. That said, they really need to stop this shit.

Crowdfunding is not a purchase, it is an investment. In particular it is venture capitalism in its purest sense. And one of the characteristics of venture capital is that it's risky and there is no guarantee that you will get your reward. That's the nature of the thing. Some people are going to overestimate what they can do, and asking them to give the money back is kind of stupid because they will have spent it, and if they had that kind of money to part with they wouldn't have had to crowd fund the project. So before you contribute to a crowdfunded project you be sure the coolness of the project and the reputation of the players justify your gamble on them.

And if PayPal is a payment processor, then when I give them money to give to someone else and they don't give the money to that someone else, it is theft, full stop. Not from the project but from me. I didn't send PayPal the money to hold onto it or to interject their management style as an afterthought. I give PayPal the money they better fucking give it to the people it was meant for or they will start getting mail, and not the electronic kind. The kind with return receipts requested, the second round of which is copied to my state's attorney general.

Yes, they need to protect themselves from chargebacks and fraud. That should take about an hour to check out. When it's a crowdfunded investment the policy should be that investments are risks and can't be charged back. It is easily verified that the account belongs to a kickstarter and that should end the matter.

Though in fairness it would probably be easier for PayPal to adopt this stance if the crowdfunding agencies were more willing to use this kind of language up front. It would also soften the blow when a disaster like Clang comes along because hey, it happens. It's happened remarkably little considering how new the model is and some of the things it's been used for. It would probably be a good idea to close investment at a certain point to limit overfunding by orders of magnitude, because a sensible plan for a certain sized pile of money might not be as sensible for $PILE * 10 with $OBLIGATIONS * 10 to meet.

But part of it is always going to be the reputation and history of the people asking for the money. Just like when they pitch to VC's.
posted by localroger at 4:01 PM on September 20, 2013 [1 favorite]


Crowdfunding is not a purchase, it is an investment.

You know this brings up another amusing point that's been brought up on the blue before, actually. kickstarter/indiegogo/etc are basically investment platforms but pretend not to be in the same way that paypal pretends to be a processor and not a bank. They're essentially "donate and you get gifts!" platforms in a really grey area wink wink nudge nudge sense because if they were investment platforms they'd need to follow a whole ton of rules and regulations, and all the people investing would need to be registered in some kind of weird way and meet various requirements and there'd be tax stuff and bla bla bla.

Someone more knowledgeable than myself outlined why and how people actually getting equity in the company they're essentially investing in, or any real money out of the product sales later on, or anything like that would be a Huge Problem... but yea.

These crowdfunding platforms are skirting the edges of the laws/regulations in the same way paypal is. They aren't being assholes... yet, but their hands aren't really all that much less dirty than paypal's when it comes to following the law in letter but being all rules lawyery and completely disregarding it in spirit.

In reality this stuff is so new that the kind of changes your talking about are being slow walked and downplayed because they want people to funnel money into these startups investment platforms without thinking to much, or honestly being too educated about what they're really doing with their money.

I think they're really REALLY afraid of if they implemented a "tough cookie, you didn't buy anything" hard-and-fast policy like that, which wile it might placate paypal... would probably result in someone who threw down 10k on a big project(or was a lawyer, or whose dad/uncle/brother/best friend/SO was a lawyer, or who just had money to shoot at it) then sued the site for somehow misrepresenting shit. Or sued the site and the project creator... or something. I think they're all really really afraid of someone pulling out the baseball bat of legal antics.

Really though i hope that these people start taking the non frozen portions of their funds and hiring lawyers to fuck up paypal though. Over and Over and Over. Until both paypal and the crowdfunding sites change their tunes. For this to work the way everyone is imagining it paypal just needs to be a dumb pipe, and the crowdfunding sites need to be absolute airtight cash roach motels except in the case of proven outright fraud. Raise the bar for vetting and posting a project, and make it that way. fuck.
posted by emptythought at 4:11 PM on September 20, 2013 [4 favorites]


And if PayPal is a payment processor, then when I give them money to give to someone else and they don't give the money to that someone else, it is theft, full stop. Not from the project but from me.

I like this idea, but I think it won't fly because you're not PayPal's customer. They didn't make you any promises. You're not paying them, the recipient is.
posted by straight at 4:26 PM on September 20, 2013


Crowdfunding is not a purchase, it is an investment.

To most people investment implies you get a financial return on any profits made by the project you invest in.

With Kickstarter, the return is less tangible. The reward is simply the existence of the thing you gave them money to make. (At least in the pure form. A lot of the rewards part muddies things up quite a bit.)
posted by straight at 4:29 PM on September 20, 2013


PayPal is well know to be scum. But indiegogo is also a rip-off site. There are constant "free energy", "zero point energy" and "overunity engines" scams going on there - they do not police these, but worse, when you point out the problems, they simply don't respond.

The dice are heavily stacked in favor of scamsters on Indiegogo - if you ask questions or, heaven forbid, express doubts about any project, the people proposing it can simply delete your comment without trace. As a result, all of these projects are simply pack-full of gullible people saying how great they are, giving the impression of a sure thing.

A plague on both their houses. I'm contemplating my next move involving the free energy scams and Indiegogo - I have a personal hatred for this crap - but in the meantime I simply don't subscribe to anything on any of these sites from anyone that I don't personally know.
posted by lupus_yonderboy at 5:17 PM on September 20, 2013 [1 favorite]


I like this idea, but I think it won't fly because you're not PayPal's customer. They didn't make you any promises. You're not paying them, the recipient is.

Idk, this strikes me as a shitty analogy. As soon as they charge you a fee, you're their customer. They could MAYBE make this argument if they weren't taking anything off the top... but tough shit, imo.

This is almost exactly as if a private company like UPS pulled this. As in, i pay them to mail a check to XYZcorp. But they decide that XYZcorp might be defrauding me and hold the package with the check in it.

How would that fly? UPS doesn't get to be paternalistic and weird like that. The only reason they're getting away with this is because they're doing it all in cyberspace, and the laws aren't really that well mapped out yet.

It really is more wild west-ish on here still than we realize, but the only people benefitting anymore are the robber barons.

And once again, i still think the huge amount of money they're making off of sitting on peoples money like this is being ignored. I'd imagine there's probably thousands of people for whom they're holding on to over 20k, possibly even thousands that it's over 100k. That's all racking up interest somewhere. For them.
posted by emptythought at 6:30 PM on September 20, 2013 [1 favorite]


Crowdfunding is not a purchase, it is an investment. In particular it is venture capitalism in its purest sense.

This fallacy comes up every time Kickstarter comes up; it's so persistent I have to wonder if Kickstarter encourages it. An investment, particularly a venture capital investment, means you are buying equity in the endeavor. If the thing you are investing in does well, you stand to profit. You have a potential upside.

Kickstarter doesn't do that. You don't get any stock in the project or company. Instead, most of the big Kickstarters are structured as prepurchase agreements; you pay now for promise of a thing delivered in the future. For instance, the 5369 people who spent $25 on Clang were promised "Download of the game (motion control hardware not included), as well as a thank you credit on our website and within the game.". That's not an investment, that's a purchase of a good.

That's why non-delivered Kickstarters are such a problem for the whole crowdfunding thing right now. The TOS of Kickstarter are very clear: if the project does not deliver the promised rewards, then they are supposed to refund the money. It's not a risky investment, it's a promised delivery of a good. Unfortunately it's not working out that way with all projects. Even worse, there's no actual protection to backers of Kickstarter projects, no way to recover your money you spent other than ask them or sue them.
posted by Nelson at 6:54 PM on September 20, 2013 [2 favorites]


"In particular it is venture capitalism in its purest sense."

Only if you'd describe craps the same way.
posted by klangklangston at 7:12 PM on September 20, 2013


Crowdfunding is not a purchase, it is an investment.

No, it's patronage.
posted by ChurchHatesTucker at 7:18 PM on September 20, 2013 [5 favorites]


Ditching Paypal has been difficult for me for two reasons: 1). I do business with people online sometimes who only accept money through PayPal. I've asked them to consider other avenues but those conversations don't go anywhere. 2). I feel better in a way that PayPal has my debit card number rather than PayPal AND Steam AND Amazon AND online boutique X AND that Etsy store AND Apple all having it. My feelings of increased safety through less spreading of my card info are likely false though, because NSA.
posted by koucha at 7:26 PM on September 20, 2013


Only if you'd describe craps the same way.

Blackjack paid off my house. I would describe craps the same way. All gambling is gambling, the only difference is the EV. In a crowdsourced startup nobody knows the EV, so you're on your own evaluating it.

No, it's patronage.

OK this flies. Again, there is no guarantee that your pet artist can provide a return on your investment, and it's a much better metaphor than VC.

The whole thing to me about crowdfunding is that the individual buy-in is low enough that you CAN risk losing it to fund something that could be cool. That's what makes it do-able, because you're DOING SOMETHING RISKY. Instead of looking for one of the few bazillionaires who could afford to lose their investment in you you look for lots of little people, but it's the same thing where we all know we're crossing our fingers to hope you can come through.

When nothing has gone wrong yet for PayPal to inject itself into a project as a manager is totally fucked up and not justifiable by any model of anything I can ever recall. Whoever thought that was a good idea needs to have been fired yesterday.
posted by localroger at 8:11 PM on September 20, 2013 [2 favorites]


I like this idea, but I think it won't fly because you're not PayPal's customer. They didn't make you any promises. You're not paying them, the recipient is.

Um, no, this is exactly backward. I GAVE THEM THE MONEY. They promised to do a certain thing with it. If they don't do that thing with it then they had better be ready to give it the fuck back or get sued.

As for what fees get shed off before it's forwarded that's not my problem. They add that seamlessly to what the vendor wants before giving me the bill. Oh, and if they decide to shaft my vendor, when they give the refund I'm going to demand my attorney general demands of them, it better include that fucking fee, since they didn't perform any service for anyone.

Oh, and if I had been involved with any of these fiascoes personally, I would have totally taken the time to sue PayPal in small claims court here in New Orleans. It would mean nothing individually since collection is impossible, but it wouldn't take much of that to make their lawyers pay attention.
posted by localroger at 8:20 PM on September 20, 2013


PayPal certainly sucks, but as others up thread have noted, KickStarter is the really sketchy player in this. Patronage is the best term I've ever heard for what it really is. It is not investment, nor venture capital, as there's no equity, and KS does emphasize that they are not a store. There are more and more horror stories about people just blowing the cash and saying, "sorry", or other totally fraudulent shenanigans.
posted by Windopaene at 10:36 PM on September 20, 2013


So I shouldn't do a Kickstarter thing for our new project then? Is that what I'm hearing? Cause I was kind of considering it (for a music project my wife and I are working on)...
posted by saulgoodman at 10:52 PM on September 20, 2013


The problem with Kickstarter is limited controls on unscrupulous or incompetent owners, not interference by PayPal (since KS uses Amazon Payments exclusively). As long as you're confident in your team, go for it.
posted by Holy Zarquon's Singing Fish at 5:29 AM on September 21, 2013


chrominance: "Additionally, I don't think credit card companies are in the business of messing with other people's businesses."

Crowdfunding's secret enemy isn't Paypal -- PayPal's reputation as villain has been established for over a decade.

Allow me to share some pre-kickstarter internet funded projects. In one case there was a project to fund crowd fund open source Linux drivers for NVIDIA that encouraged a lot of people to make small donations; the french bank involved accepting these donations froze all funds in the account on suspicion of fraud, given the nature of lots of small transactions in a short time on a single account, and the developer ultimately decided it was not worth the trouble for the money that came in. In another case, a US group seeking to produce an open source portable console had considerable trouble at around day 32 when the credit card agencies found out they hadn't shipped their preorders, contrary to their merchant agreement. The Pandora eventually shipped, but quite late, and at a different price point originally planned on.

I think the lesson here is that you shouldn't financing your speculative business via preorders. Consumers have a set of expectations, and intermediaries to help them achieve that in the form of chargebacks. They are not generally well informed investors, nor capable of assessing risk (or at least willing to). Normal investors may not have much better ability to evaluate the project's risk, but at least they understand they may not get their money back, and therefore seek compensation in the form of equity.
posted by pwnguin at 8:16 AM on September 21, 2013


Yea, CLANG, you suck.

I think his involvement in CLANG has turned me off from every buying another Neil Stephenson book.
posted by T.D. Strange at 8:51 AM on September 21, 2013


Meanwhile, they got to their half million in 30 days, so there probably wouldn't have been much trouble raising another million.

I think their funding languished at the 300-400k level for the last week, and then hit 500k. My take was that they couldn't reach their goal via $25-$40 backers, and someone with deep pockets stepped in to close it.

I don't think they were going to raise more via Kickstarter.
posted by zippy at 9:21 AM on September 21, 2013


Technology Review profiles Ben Milne, founder of PayPal competitor Dwolla. Their solution to safer payment processing is to have direct relationships with banks.

Here's some more commentary on CLANG: Wired, KitGuru. I really don't see how Subotai can legally do anything but refund everyone's money. Stephenson's face and name is all over the project, too, what a fiasco.
posted by Nelson at 10:19 AM on September 21, 2013


Nelson: "Here's some more commentary on CLANG: Wired, KitGuru. I really don't see how Subotai can legally do anything but refund everyone's money. Stephenson's face and name is all over the project, too, what a fiasco."

Previously, he struck me as a pretty smart cookie.

Not so much any more. He pretty much shot himself in the ass. Worst of all, he did it with his fanbase.
posted by Samizdata at 11:48 AM on September 21, 2013


I like the things Elon is doing with his money. You folks keep giving Pay Pal money, and I'll be over here watching his rockets and paying with credit cards or anything else that isn't Pay Pal.
posted by NortonDC at 2:32 PM on September 21, 2013


CLANG is such a textbook example of how not to run a Kickstarter campaign: ask for a huge amount of money, fail, blame everybody but yourself.

I'm always in such two minds about Kickstarter. It's been amazing for several industries that I love (especially board games, in which it's caused a revolution for indy makers) but as the projects get bigger and bigger, so too does the issue of the lack of accountability. One day soon somebody's going to take millions and deliver nothing and it feels like the whole system will blow up.

I don't know what the alternative is, though. The whole point of Kickstarter, at least originally, was to generate funds for people who couldn't raise money any other way.
posted by Georgina at 6:31 PM on September 21, 2013


Wait can someone explain to me exactly how CLANG didn't do what they said they would? Didn't the page explicitly state they were only making an alpha, and getting to a working model of the game people could try out kinda like the oculus rift?

I'm really confused as to what they said they'd do that they didn't do here. From what i've seen it seems like a case of unrealistic expectations and inferences on the part of a lot of the backers that they were getting some relatively finished beta of a game they could play with that controller, or something.

It seems like at worst they were skirting the line between implication and stating something in a kinda shady way. Am i missing something?
posted by emptythought at 12:01 PM on September 22, 2013


I should mention here that I didn't back CLANG.

emptythought, if you take a look at the Kickstarter page, I think you'll see why many backers are up in arms. The page is written in a way that is, I would suggest, either incredibly sloppy or deliberately deceptive. It spends eight paragraphs describing the project as if it'll be a real game, lists details of how it'll work ("At first, it'll be a PC arena game based on one-on-one multiplayer dueling", discussion of latency, precision, depth of moves, etc), and then buried in there is a single sentence about how what they're working on is a prototype.

Watch Stephenson's video, in which he says they're beginning with the prototype, but then adds, "Don't worry, we're going to make a game." (Implication: the game you will be getting.) He then describes that game, which echoes the text I quoted above: an arena duelling game for two players.

Check out the reward tiers, in which you're invited to back for a "Download of the game", or perhaps "Two copies of the game". Conspicuously missing is any word like 'demo', 'prototype' or 'alpha'.

It's very, very easy to read the page and watch the video and think your reward will be a game that's small in scope (arena fighting) but playable and has all the precision and depth of moves they talk about. It's quite difficult to come to conclusion your reward will be a buggy unplayable demo. Yet that is what's been delivered, and now the creators claim the project is complete.

(Based on some backer comments, I believe they've also failed to deliver the illustrated CLANG fighting manual. About 1,500 people backed a reward tier that included that, in either pdf or physical form, along with 37 more who paid $500 each for a signed copy. Ouch.)

I don't know Stephenson, except by writerly reputation, but if he's not considering refunding backers out of his own pockets, he's displaying some very poor judgement. He asked his fans to take a leap of faith with him, and they got burnt horribly.
posted by Georgina at 4:04 AM on September 23, 2013 [3 favorites]


Looking at a real-world Clang playthrough, I have a really hard time even calling it a "proof of concept" - they haven't really demonstrated that their physics engines are capable of doing what they need them to do for a more realistic sword-fighting feel. It looks so different from the "tech demo" videos posted to Steam Greenlight and youtube that I really wonder what happened between those videos and delivery.

I think they'd have much better press now if they'd simply said, "For $25 you have the chance to alpha-test our game for us!" I don't think that's what they intended when they said that they were delivering a "proof of concept" (otherwise, why not state that?), so pretending it was is a bit disingenuous. Looking at their updates, it's pretty clear that they discovered that making realistic games is hard, and making fun games is hard, and making fun, realistic games is hard.

To their (very minor) credit, they did deliver something rather than just going radio silent.
posted by muddgirl at 9:28 AM on September 23, 2013


Wow, ask and i am informed.

Doesn't that, reading it, REALLY sound like a case of that whole "YOU GUYS, i have this GREAT idea for a game and it'll go exactly like this" that one friend would say to all his other friends in middle school. Or more depressingly, that you hear from college students and adults who want to be "game designers" or "idea men"? You know, the kind of people who describe impossible to implement "Like GTA, but an MMO, and with perfect engines for flight simulation and driving and shooting and..."

It's sort of on the same tier as business-speak where it talks a lot of game without actually promising anything or saying anything concrete. Lots of implicitness without any concreteness to leave lots of wiggle room for backing out or going "Well i mean, it's just an idea" "I didn't commit to that".

I feel bad for the backers, and for anyone involved in the project who was caught inside the hubris reactor and probably got some 3rd degree burns from all the hot air.

It doesn't surprise me no one will give them more money. This project seems like an absolute bottomless hole to throw money in to and even if it's finished, get very little out of.

I don't know Stephenson, except by writerly reputation, but if he's not considering refunding backers out of his own pockets, he's displaying some very poor judgement. He asked his fans to take a leap of faith with him, and they got burnt horribly.

On a related note, where the fuck did all that money go? 500k is a lot of money. I wish i had backed this so i could come out and demand a list of expenses because what. I don't doubt that he has the money to refund people, but i really wonder where all this money went.
posted by emptythought at 9:48 PM on September 23, 2013


Watch Stephenson's video, in which he says they're beginning with the prototype, but then adds, "Don't worry, we're going to make a game." (Implication: the game you will be getting.) He then describes that game, which echoes the text I quoted above: an arena duelling game for two players.

Nice bait and switch.
posted by flabdablet at 10:13 PM on September 23, 2013


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