PayPal Freezes MailPile's Crowdfunded Cash (Updated)

The other week we covered the crowdfunded initiative out of Iceland, MailPile, which seeks to provide easy to use secure email in response to the revealed NSA programs. They've raised $135,000 out of their $100,000 goal, and theres 6 more days for more wallets to get involved.

Well, sorta. PayPal has frozen their account, so $45,000 of the $135,000 they've raised so far is in a state of limbo. According to designer and front-end developer Brennan Novak on the company's blog, PayPal is reserving the right to hold onto the money unless they come up with a budgetary breakdown of how they plan to use the donations.

This puts the company in an uncomfortable position, because it's a strange request from the payment provider.

In a later update, tech lead Bjarni Einarsson writes,

"We understand this turn of events may make some of you angry with PayPal (we are a bit frustrated ourselves), but we would like to request that nobody cancel their payments or take any action aside from speaking out. Ironically, their justification for withholding the cash is concern about charge-backs. So please, don't give them any ammunition on that front by requesting refunds. It's a weird, complicated situation, but we are confident we will prevail in the end."

Financial fraud mitigation is a huge problem for any payment provider, but the it seems I'm hearing more and more bad news about PayPal and other payment providers. What's the easiest to work with in the Nordics?

Edit: A PayPal representative has reached out with this 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.

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