Insanity: PayPal Freezes Mailpile's Account, Demands Excessive Info To Get Access

from the why-we-need-paypal-alternatives dept

See update at the bottom

A few weeks ago, we wrote about Mailpile, a new attempt to create a webmail client that is built with both security and usability in mind — think Gmail/Outlook-type interface, but which you can control and with built in security. The project looks awesome and is greatly needed these days, as we learn more and more about government intrusions into hosted webmail accounts. Their IndieGoGo campaign has been a huge success, going past their $100,000 target, and is currently at around $137,000, which will allow the three person team to focus on it full time.

Except… as the team announced this morning, PayPal, for reasons known only to PayPal, has decided to freeze their funds and won’t let Mailpile access the money that people donated:

Saturday August 31st I woke to two emails from PayPal. The first notified me they had cancelled the debit card associated with my sole proprietor business account, the second was informing me they placed a block on my account barring me from withdrawing or sending any money out of my PayPal account.

Assuming this would get sorted out after a little explaining/security check, the team has been trying to get PayPal to unfreeze the account, with no luck. PayPal is demanding an insane level of detail into Mailpile’s personal finances and business:

Afer 4 phone calls, the last of which I spoke to a supervisor, the understanding I have come to is, unless Mailpile provides PayPal with a detailed budgetary breakdown of how we plan to use the donations from our crowd funding campaign they will not release the block on my account for 1 year until we have shipped a 1.0 version of our product. A final email communication from PayPal reaffirmed us of their stance by stating:

“Please provide an itemized budget and your development goal dates for your project”

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.

Even worse, it seems that the folks at PayPal recognize that it holds power over Mailpile, and seems almost to be lording that power over them:

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 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.

This isn’t all of the money raised — it’s about $45,000 of the $137,000, but it’s still a huge pain. Mailpile has now had the Software Freedom Law Center look into their legal options for obtaining the money that people donated to the project.

Yes, PayPal has a long history of similar things, but that doesn’t make it okay.

Update: And… of course, the inevitable backtrack. After all the publicity. From PayPal:

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.

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Companies: mailpile, paypal

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Comments on “Insanity: PayPal Freezes Mailpile's Account, Demands Excessive Info To Get Access”

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Arthur Moore (profile) says:

Re: Re: Re:

Don’t be so sure of that. I’ve had paypal do very strange things to my account before. While I finally figured out what they were doing it wasn’t a fun experience. I had to call my bank before I figured it all out.

The best part was when the guy on the phone told me he didn’t use paypal, had dealt with too many paypal horror stories, and offered to close my account and make a new one that paypal didn’t know about for me.

Anonymous Coward says:

And people wonder why BTC is popular

This, my friends, is why Bitcoin has become a viable digital currency.

There’s no “bank”, no “regulations”, no “gatekeepers” preventing money from exchanging hands.

I still find it somewhat ironic that organizations like Paypal punish their customers to this extent, publicly. As if they are just taunting people to see if they’ll stop using the service.

Anonymous Coward says:

Re: Re: Powertrip much?

It’s an interesting idea. But it doesn’t hold water.

Here’s why: what Mailpile is doing won’t work. Source: close examination of their design by someone who’s been running mail servers since before most of you were born.

I know this. I’m sure the NSA know this. I’m not sure Mailpile knows it, or if they do, if they’ll admit it. But there are fundamental design flaws in Mailpile: that is, things that aren’t mere coding errors and thus can’t be fixed by debugging code. They’re baked-in.

Yes, I’ve informed Mailpile. No response yet.

Oh, incidentally: like I said, I know this, and I’m sure the NSA and friends know this. I’m also sure The Bad Guys know this and can’t wait for Mailpile to go live so that they can exploit it.

ECA (profile) says:

Re: Re: Re: Powertrip much?

I know your point. And Agree mostly..
There are Vulnerabilities IN hardware and software..Its even been reported here.
There are Problems with making PASSWORDS that cant be cracked..
There is a BIG ONE, on the Client side, and someone getting access to the person computer.

They made an HARDWARE EMAIL BOX(a $50 custom Linux, encrypted CLIENT..
Then, USed some ODDBALL language…And Customized it abit..
Then RUN HARDWARE programming to control Any Errors/backdoors to enter the system BEFORE logging into the Email..THEN the software signs into the Email(thats 2 passwords)
THEN GIVE DEDICATED PASSWORDS of name and passwords, to the persons Client..The USER dont even know them..
Then REQUIRE the USER to use a PASSWORD to even access the unit..AND IF its MISSED more then 3-5 times…ITS ERASED and the account is LOCKED.

REAL PAIN system to use..

Todd Knarr (profile) says:

Re: If a bank...

That’s because PayPal isn’t a bank and isn’t regulated like one. And they’ve vehemently opposed any regulation. Myself, I isolate PayPal from my money. The bank account they’re linked to is only used for them, and it only has enough money in it for whatever transfers or payments I have in progress at the moment. If I were receiving large numbers of transactions I’d go one step further and switch PayPal over to a dedicated account at a completely different bank, one I didn’t use for any other purpose, and all received funds would be immediately swept into the bank account and then transferred over to my real bank (where there’d be an instruction on file denying PayPal authorization to access my accounts) leaving literally nothing for PayPal to tap into.

That One Guy (profile) says:

Re: Re: Re:3 If a bank...

Simple payments out, nothing in.

I generally use them for purchases like music and ebooks(bandcamp and smashwords respectively), and while I haven’t noticed any problems to date, if other people are having such trouble with them, I’d prefer to find alternatives if possible before I end up with my own ‘paypal nightmare story’.

John Fenderson (profile) says:

Re: Re: Re:4 If a bank...

If you’re paying someone through PayPal, your risk of a nightmare story is much lower than if you’re receiving them, and you may not have any choice but to use it (as it’s up to the vendor to decide who it uses to process payments).

Regardless, though, you should use a prepaid debit card, loaded with just enough cash to make the payment you need, to do any online purchasing. That way, the most you could lose is whatever the balance on the card is.

Anonymous Coward says:

Paypal is a Money Broker. That means they are less regulated than banks and credit card companies.

In other words, they play by their own rules. I found this out the hard way when someone tried to scam me on eBay. I ended up getting my money back, but I’ll never use eBay or Paypal again.

BTW, Ebay owns Paypal. Literally.

Ray C. says:

Re: Re:

It took me 2 long years and countless emails and phone calls to get Pay Pal to release a bank account they had access to. The account was only for online purchases, so not much in it, but it meant I had to open another account for that purpose. During this time I learned of E bay’s ownership and went after them with a cease and desist order that didn’t do a lot of good, but got a few of there accounts investigated. BOTH ENTITIES SHOULD BE BOYCOTTED AND PUT OUT OF BUSINESS.

Anonymous Coward says:

Using Paypal is like using Internet Explorer

Anyone doing so is begging to be fucked over. I find it difficult to sympathize with anyone who doesn’t know this. Even if they weren’t already painfully aware of it by 2013…2012…2011…then 5 minutes’ worth of due diligence research with the search engine of their choice would reveal it. So while PayPal are clearly doing their usual assinine best, the question must be asked: what the hell were the clueless, incompetent, negligent morons at Mailpile thinking?

Paul says:


As well as PayPal Verified. As a seller, PayPal has screwed me several times. Things were so bad that I opened a new eMail account and a new eBay account using the ID “IamPayPayTerrified”. In each & every auction I listed, I invited all those interested to visit a site where others like me posted their stories concerning their PayPal screwing. That site is gone now but there are thousands of stories easy to find with a Google search. PayPals actions are very close to being criminal the way they treat members. It only took eBay 6 months to realize what I was doing before my account at eBay was canceled. They said I was not operating “Within the Spirit of the eBay Family”…. Really?? I don’t like the fact that PayPal/eBay both seem to have their hands much too deep ino my pockets. Sometimes I have no other choice to accept payment thru PayPal – SO – The moment I see the funds have cleared my account I transfer them to a safe place away from PayPal or eBay. I am afraid to ever leave any funds under their control. I am still “PayPal Terrified” and have learned a hard lesson the hard way.

Anonymous Coward says:

PayPal thinks it has the right to tell people what they can do with money, just because it is in a PayPal account! what should happen here is that PayPal should be taken to court and made to seriously pay for what it does. perhaps also being told that it is being broken into smaller sections may help because as it is atm, it is like an international bank, it thinks it’s too big, not just to fail but to be taken down!

vilain (profile) says:

Still have an account, but

I won’t verify it by giving them a bank account. The credit card I used was their Providian card that takes *weeks* and USPS letters to resolve payment issues. I switching to a bank credit card.

I never use Paypal to accept payments. I only use it to send payments which charges my credit card. I stopped using eBay years ago after being burned on some auctions.

Lost a client who was a Paypal engineer when he offered to pay me through Paypal. He didn’t like what I had to say about their service and wanted a check or cash. That’s just fine with me.

Internet Zen Master (profile) says:

Re: Re:

It is time to regulate paypal like a bank.

This. This. A thousand times this.

I’ve always been wary of using that thing, and try to avoid using it if at all possible for obvious reasons.

PayPal is a bank in everything but name. They know it, we (the internet) knows it, so why the hell haven’t the regulators realized it and done something about this bull yet? [oh wait, they’re regulators. Inefficiency tends to be their M.O. these days.]

Will PayPal ever have to pay the piper for its outrageous shenanigans?

As the Zen Master says, “We’ll see.”

Jon Renaut (profile) says:

Paypal for business is terrible

I had a bad experience with them, too, though luckily they only had $2 of my money. I signed up for a business account, was verified in all of a few minutes, set up the website, then did a test transaction. They instantly locked my account. I tried to get it unlocked, and they told me my business model violated their terms of service.

It sure appeared to me that they set things up to get that first month’s payment out of everyone without any sort of verification, but the moment you actually USE the account they would do an actual review. I gave them an overview of the business model from the beginning, but they clearly didn’t look at it until I did the test transaction.

To make it even better, they told me the only way to close the account was to unlock it. To unlock it, I would have to change my business model and then they’d reconsider.

Paypal is great for paying people on eBay. Beyond that, stay away.

slinkySlim (profile) says:

Re: Paypal for business is terrible

“Paypal is great for paying people on eBay. Beyond that, stay away.”

No. No, no, no and no. The only thing paypal is great for is a target. If a seller on ebay has been coerced/forced to accept only paypal then you shouldn’t be buying. Until the seller learns that they have other options that, most probably, doesn’t provide both ebay & paypal with a skim then they should be made to suffer their losses.

PayPal are cunts, plain and simple. Fuck ebay & paypal and the horses they road in on. Actually, save the horses.

They need to be bank or they need to die.

Just turn away. DO IT! Or I’ll kick your cat.

Anonymous Coward says:

If you ever use PayPal (God help you if you do), make sure your transaction goes through as a Credit Card. Not as a Debit Card!!!

It’s possible to do a ‘charge back’ through your bank with a Credit Card, and force PayPal to return your money. There is no way to get your money back from PayPal if your transaction goes through as a Debit Card!

PayPal defaults all transactions as Debit Card, transactions. You have to look really hard during the PayPal checkout process, to find a blue URL/Hypertext link which will allow you to switch the transaction from a Debit Card, over to a Credit Card.

I highly recommend you do not use PayPal though! It’s like playing with fire. Eventually you’re going to get burned. Probably sooner than later, as MailPile just found out.

Anonymous Coward says:

I am confused.

How does PayPal work?

No, I understand how you buy things through them, but if you are accepting payment as a business, how does that work?

Whose money is it that they are holding?

People giving money sure as hell aren’t giving it to PayPal to dole out as they see fit – how would this be even remotely legal?

Also, what is their reasoning for even considering the business model of it’s customers? Are they going to trot out the ‘protect against money laundering’ crap, as if there isn’t a paper trail a mile long with this stuff?

I have tons of questions, and every comment is just saying, ‘paypal sucks’ and ‘don’t use paypal’ Good advice, I’m sure, but what the hell is going on?

Anonymous Coward says:

Re: Updated...

And a lovely bit of BS their backtracking is. There are no regulations that justify demanding that the company release a version 1.0 of their software before releasing the money, money that the company would need to develop said version 1.0. Those laws and regulations they cite are centered wholly around reporting with transactions of given amounts, and complying to court orders to freeze accounts. All the rest of their demands about itemized budgets and development goals were purely Paypal fiat.

Anonymous Coward says:

Re: Updated...

I hope MailPile moves all their customer’s funds out of PayPal, and into a private bank account before ScamPal decides to freeze the funds again.

Hopefully MailPile learns their lesson after seeing ScamPal’s true face.

Never forget that ScamPal is a ‘Currency Broker’, with their own set of rules. They’re not regulated like a bank or credit card company. You are 100% at ScamPal’s mercy. They can freeze your funds for as long as they want too.

Anonymous Coward says:

A company fixing to develop a secure mail server and method of delivery. One would have to ask who would benefit most from such a service not being developed?

It is well known that the NSA has major headaches with encrypted services. It wasn’t long ago two email services shut down over the threat or potential threat of jail time because they wouldn’t allow back doors installed. In the case of Lavabit, they went as far as saying that shutting down the business might be tantamount to jail time. That tells you the real target was most likely Snowden’s communications. They wanted access for early warning and closing down the business meant he’s not using it anymore.

This demonstrates that encryption is a headache they don’t want to go through. So I would suspect given this, the US government has put pressure on PayPal to halt, slow down, or impede payment for a method to possibly halt the development or to give enough time to figure a way in.

Paypal has demonstrated before it is complicit with these types of unofficial demands.

Anonymous Coward says:

Sorry, but… STOP USING PAYPAL. Should be one of those first lessons of the internet. Sure for some SMALL things here and there, why not?

If you are transferring large amounts of money or basing your business on it YOU HAVE ONLY YOURSELF TO BLAME.

Given their history and ridiculous customer support you are seriously tasking wolves with guarding the hen houses while paying them more money (seriously, their rates aren’t even competitive) than someone who is not an asshole wolf that’s just going to eat all of your hens… maybe this metaphor is a bit stretched and contorted at this point.

Eponymous Coward says:

Re: Re: Re: So, it sounds like...

eBay using only PayPal is a seperate issue though; and while it may be an unfair business practice I doubt anything will come of that. While I get that many people were complaining about it stemming from use of the service resulting from an eBay transaction, that’s not the full scope of it’s use anymore. As we see in this story people also use it for crowdfunding and another service could equally do the same. So, unless eBay owned the crowdfunding platform, it’s somewhat irrelevant. The only argument I can see being valid is the one that says an alternative service won’t become successful without the ability to use it on eBay. Though I don’t think eBay has that type of clout anymore, but I may be biased on this since I don’t use it. Therefore I think with the growth of crowdfunding platforms, and others, alternatives to PayPal can gain a foothold to compete.

ECA (profile) says:


I hope you understand the PAYPAL SIDE
(dont get me wrong, I TRY NOT to use paypal)
PAYPAL is a middle man with a FAIR TRADE initiative..
REMEMBER who they are..EBAY/PAYPAL..

They want to see the PRODUCT is being delivered.
They want to see the BASIC BUSINESS DATA, for a product.

How many of these PRE-START UPS, have gone rogue and ran off with the money, or FAILED, AFTER THE FACT??

Think about a product..
HOw many of these groups have gotten millions of dollars for a product/project?(this is PROFIT)
THEN Brought a product to the market and had a HIGH price on it?(MORE PROFIT)
Dont tell me this is 2 different things..
Its the designation PARMA CORPS give, when they charge people $100+ per pill, AFTEr its been developed.. That they have to PAY the development costs AFTER the fact..

If yo figure that there are 3 people working on this, and EACh will get $30k EACH for a years work…Thats about $90k of the money. Lets add some hardware like a SERVER SETUP…Add $10,000 for a BASIC server..WHICH IS $100K TOTAL.. IF THEY DO THEIR tAXES PROPERLY THEY GET TO KEEP mopst OF THE DEDICATED WAGES.


teka (profile) says:


None of those things are functions that the involved parties (people giving the money, mailpile getting the money) wanted. They were not selling email software on Ebay, where there are rules and satisfactions pledges and the like.

Pledgers A through Z+ authorized paypal to take money from their credit/debit/bank and give it to mailpile. Not vet mailpile, not do a cost/benefit analysis, just make the transaction (for which PP takes a percentage/fee somewhere on the back end I am sure)

Doing anything else that is exceeding the requirements of law enforcement in the slightest, is wrong.

ECA (profile) says:


Do you know HOW and WHY paypal was Built?
I do.
I watched it happen..

An EQUAL exchange of Product/service for MONEY..and BOTH parties must be satisfied..PERIOD.

And thats what gets PEOPLE PISSED, as 1 person can NOT have a good day, complains and the associated OTHER PERSON gets SHUT DOWN.

Odds are you havent read SOME of the nightmare stories that Paypal has gone thru.
And HOW SOME evil people have TRIED to take advantage.. Paypal solved that..
You cant stop the GOODS, but you can CONTROL the payment.
If the goods dont MATCh then payment is not made, or is STOPPED(thats the 30day coverage, to complain)..
BUT, also that GOODS must be returned..OTHER wise your money WONT be returned EITHER.

Consider that when you DEAL with Paypal..

Cyber Killer (user link) says:

Stop using - easy to say

It’s not easy to stop using paypal, when most internet shops accept payments only through them. PP has a monopoly over payment services, and while there are other companies to do this (Skrill, google, amazon, etc), it’s rare to see any shops use them. Even so called ‘direct’ cc payments in shops are done via pp.

Cowards Anonymous says:

Re: Stop using - easy to say

Bullshit. I’ve been using the internet since 1993 before PayPal or the Web browser existed, regularly make payments over the internet, and have never once used PayPal to make a purchase. Recognized PayPal as a scam the first time they appeared on the scene and they’ve never changed. Never used eBay either due to lack of trust, but there are so many other places to buy from that it doesn’t matter to me.

There is always another payment option or vendor to do business with on the internet. I think I’ve only ever not proceeded with a purchase once because the vendor only accepted PayPal, but I either made the purchase elsewhere or bought it later after the vendor added some real payment options to their site.

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