PayPal faces lawsuit for freezing customer accounts and funds
We are Europe&#x27;s largest site for RFID and pentesting hardware (lab401.com)<p>We are in the exactly the same situation.
PayPal has conducted a personalised, manually executed war of attrition against our company and shareholders.<p>Eight months ago, PayPal froze our account, seizing 15kEU.
They refused to give any justification for the action, despite discussions with C-level staff.<p>After the 180-day &quot;withholding&quot; period, we were informed that they would not release the funds, for undisclosed reasons.<p>We immediately engaged legal counsel. PayPal refused to interact with our counsel, and so a C&amp;D was issued.
Within one week of the C&amp;D, PayPal did the following:<p>- Froze the account of our sister company (in Hong Kong), seizing 35k EU<p>- Froze the personal accounts of all shareholders of the EU and HK corps (~1,5k EU)<p>- Froze the business accounts of all shareholders by name search (different corporate entities, different businesses) - 5kEU<p>- Froze the business accounts that the shareholders held (again, different corps, different businesses) - another 5kEU<p>Our policy is to empty accounts on the 28th of each month.
PayPal froze and seized funds in all accounts on the 27th of the month.
Based on the time-stamps of the emails, and the order in which the accounts we closed, it&#x27;s obvious that it was a targeted, manual process (2 - 3 minutes between closing each personal account, 15 minutes to find the next company account, 3 - 5 to close the personal accounts, and then 10 - 15 minutes for the next company accounts).<p>We engaged secondary legal counsel in Luxembourg (PayPal&#x27;s EU headquarters).
Again, PayPal refused to disclose any reason, justification or proof, replying with typo-ridden copy-pasted document from a low-level legal peon, concluding that no funds would be returned, the businesses and personal accounts were deemed &#x27;illegal&#x27;, and as such, PayPal would confiscate all funds.<p>All KYC was performed. All accounts had been &quot;audited&quot; by PayPal (when you reach the 5k, 50k, 100k+ processing tiers).<p>Needless to say, operationally - we have shipped 50kEU of hardware to customers, and face losses of the hardware, and costs of replacing stock.
I agree with the standpoint: this is purely racketeering - an online equivalent of Civil Forfeiture.<p>For extra context, as the points have been raised in other comments:<p>- In a perfect world, no merchant would use PayPal. In our experiments, disabling PayPal cuts revenue by ~30% in our industries.<p>- Pentesting products could include illegal products: keyloggers, etc. We sell no such products for obvious legal and compliance reasons. All the products we sell are sold by countless other resellers that use PayPal. We have processed Visa&#x2F;MC with Stripe for over 6 years with no problems (legal, chargeback, etc)<p>- We empty accounts regularly, to minimize fallout. However, you have to keep a healthy minimum in accounts when dealing with large volume, or accounts get limited automatically (presumably to avoid merchants pulling cash to avoid chargebacks &#x2F; refunds)<p>- We have already &#x27;invested&#x27; over 20k in legal fees. I justify this cost in (perhaps falsely) believing that we could establish some case law that could benefit other merchants.<p>It&#x27;s unfortunate that we cannot join the class action in the US, or we&#x27;d be into it.
 With that said, if anyone merchant in the EU has similar issues, it could be interesting to investigate if a similar action can be mounted in the EU. Feel free to reach out: simon at sn dot cm (not a typo).