Paypal Shafts Indie Developer, Withholds Donated Money

Paypal Shafts Indie Developer, Withholds Donated Money

It was one of the year’s feel-good stories when Lab Zero Games raised over $US800,000 so they could make more content for indie fighting game Skullgirls. It’s one of the year’s saddest stories, then, that Paypal is being really weird with the studio’s money.

Most of the contributions to Lab Zero’s IndieGoGo campaign were paid via PayPal, but given the size of the amount, the net payment giant wanted the Skullgirls developers to “take on the risk” if a large number of backers decided not to actually pledge. Something the studio obviously couldn’t do.

So PayPal froze Lab Zero’s account, locking them out of their cash and preventing employees from being paid (part of the cash was to pay the wages of the developers needed to create the content).

Following complaints, including one lodged with the Consumer Financial Protection Bureau, PayPal have since opened up the account, though they’re still holding $US35,000 as “collateral”.

Skullgirls DLC Character vote | The Campaign united us, The Voting will destroy us [NeoGAF]
Skullgirls funding held by Paypal []


  • I don’t get it, How can you crowdsource something and then have the people not actually give the money? I thought that was instant? Or is this just PayPal being bastards?

    • Paypal aren’t being bastards. They know that if people charge-back, they will lose a significant amount of money/potentially get involved in lawsuits as “accomplices”.

      In essence, this comes down to everyone being angry at Paypal for not automatically trusting another company to pull through with their kickstarter goals.
      From a business perspective, it makes sense that they wouldn’t. If the skullgirls developer DIDN’T fulfil their pledges, they AND Paypal could be held responsible for fraud.

      Sure, it sucks that they can’t pay their staff, but realistically, from the perspective of Paypal, they aren’t a viable business model. Therefore, due diligence is required on Paypal’s behalf.

      • Though you are right it makes sense on PayPal’s part that they want to cover themselves, but it is not the developer’s responsibility to help cover PayPal’s ass for the way they operate.

        PayPal should be well aware how indiegogo works and should either make it painfully clear this is what will happen if you use the service or take sole responsibility for the repercussions of their business model.

        • I disagree. Paypal are like a bank. If you or I suddenly deposit a million dollars into any bank they are bound to get suspicious, especially if it has the plausible effect of significant loss to them.

          Still, I understand the point and agree that Paypal should not be used for crowd-funding activities.

          • PayPal are not like a bank, although they want you to think they are.

            Banks are subject to a number of legal restrictions (and protections) that PayPal are lacking. The way they operate, it’s mainly the payees who wind up carrying the can for Paypal’s limitations in this respect.

            This is not the first time Paypal have pulled this sort of stunt, and it probably won’t be the last.

    • I THINK it’s because PayPal offers levels of protection for users so that they can ask for their money to be returned, even though the transfer’s instantaneous. So, worst case, people put in $800 thousand, Lab Zero gets it, people take back $800 thou, PayPal loses a buttload. And if they refuse to refund, they get litigated for breaching their own terms and conditions. I’m sure there are people that try and con PayPal with this stuff all the time, so it’s not really surprising that they’re being iffy about it when you think about the amount. But if there’s nothing specific in their terms and conditions of service, I would’ve thought it’d be illegal.

  • Isn’t this a standard thing? If they chargeback you need to pay PayPal back unless you’re covered by seller protection (only available through ebay).

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