The case of Diaspora* and frozen $45,000

Is it ever OK that a payment provider acts as a censor by shutting down anyone’s ability to accept or make payments and freezing their funds? Of course it isn’t.

Enter Diaspora*, an open source, privacy friendly social network that had its payments shut off and funds frozen on Tuesday.

UPDATE: According to a tweet PayPal succumbed to public pressure and freed their account. “Free at Last: Thanks to your tweets & emails, PayPal has freed the Diaspora* community’s donations! More info soon…” Great news!

“PayPal mysteriously and arbitrarily decided to freeze everyone’s donations,” as they wrote in their blog. And it’s not petty cash either, the organization had just raised $45,000 in a fundraising campaign a few days earlier. Now this money is locked away for up to 180 days.

Even though we’ve complied with every PayPal request, including providing them with our certificate of incorporation, they still won’t give us an explanation for any of their moves. And it wasn’t buyer’s remorse: From the thousands of donations we received, we had only one complaint and refunded that person’s money immediately. PayPal just sent us an email saying “appeal denied,” where they announced that they would lock up the Diaspora* community’s donations for 180 days. Yes, you heard that right. PayPal gets to earn interest on all of our donations for 6 months, while we have to wait for PayPal to come up with a reason to justify their decision.

The good news is that you can support Diaspora* by flattring them to help them keep going. You can also follow them on Twitter @joindiaspora to get updates on their struggle to free the frozen funds.

It looks like another case where PayPal’s decision was triggered by one of their many rules regarding unusual spikes in payments received, negative buyer feedback (clearly not the case) etc. Even though technically it’s not censorship in reality freezing someone’s access to their funds means that their freedom to act is severely limited.

PayPal’s 6 months freeze policy is unreasonable and unacceptable in this day and age. The company is notorious for freezing accounts of both small and big customers. Simon Read has a good article on that: Is PayPal right to freeze customer’s accounts?

Diaspora* is 100% volunteer-run and a non-commercial organization that launched the first version of their social network about a year ago. They aim to offer an alternative to Facebook and Google+ by building a decentralized system that makes a point of not collecting excessive data on their user and their behavior.

Other’s on Diaspora*:

TheNextWeb: Diaspora: PayPal blocked our accounts and is preventing donations
Launch: PayPal freezes Diaspora* account, disrupts fundraising efforts
The New York Times: Four nerds and a cry to arms against Facebook

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17 Responses to The case of Diaspora* and frozen $45,000

  1. Daniel says:

    Hey guys, you should make use of this and extend the »Get a flattr button«-generator → create an easy way to let people make donations to such services. In diaspora i can »only« flattr the service (when i have now clue about flattr i dont know how this cpuld do any help), but when i have a paypal like button »Donate [x] € now« people would use this and get registered for flattr as well. Hurry up ;-)

  2. qnrq says:

    @Daniel:

    We do have donation buttons. You’ll find it in the right sidebar. https://flattr.com/thing/389591/joindiaspora-on-Twitter

  3. Daniel says:

    Well yes, i know that, but you should give webdevelopers a neat snippet to include donation-buttons into their websites (right now they only have the »flattr«-button, thats its. But they should have at least a donation-via-flattr-button as well, or even better an inputfield for any amount and a donate button. Both then could redirect to flattr.)

  4. Siim Teller says:

    Daniel, good idea and spot on – it is something that some site owners have asked for. So far our focus has been on creating as simple as possible user experience for our main button but we’ll certainly consider how to offer the donation button for a larger one time payment.

    Keep those ideas coming.

  5. Cyber Killer says:

    While I don’t use (and don’t really like) social networks of the Diaspora kind (similar to failbook and g+ → www only and with pictures and all that non-txt stuff) I clicked their button to give them support for fighting PayPal unfairness and for being FLOSS.

  6. murry says:

    I have used Paypal for years now. I did not have any problems so far but I am fully aware of their terms of service which states they can withold money for up to 180 days. I guess you knew that too. While I do not approve of Paypals actions I can’t understand why anyone with a sane mind would not clear his Paypal account every day. Especially since you can do that automatically.

  7. Marc says:

    PayPal does this ALL THE TIME to organizations and companies who use their service. I don’t know why people continue to give them any business. There’s a plethora of far-better alternatives out there to use.

  8. Melpomene says:

    https://twitter.com/#!/joindiaspora/status/126752284154671104

    “Free at Last: Thanks to your tweets & emails, PayPal has freed the Diaspora* community’s donations! More info soon…”

  9. Siim Teller says:

    That’s great news!

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  11. Nacho Blanco says:

    Very good idea @Daniel. I support you.

    I’m glad for Diaspora* to have been able to release their funds. I stopped using PayPal when they did the same to Wikileaks, but the problem is that most of sites use PayPal to get paid. I wish one day Flattr will be the most important alternative to PayPal, but @Daniel’s idea is needed before.

  12. Daniel says:

    @nacho blanko For regular payments to different sites (shops, member fees etc.) i can use my credit card, thats totally ok. But other sites (art projects, blogs, opens source software →, the typical flattr target group) which would love to get donations want to integrate a credit card payment service, since it causes far to much trouble (time, effort, additional costs).
    Thats why a lot of those people use paypal on their sites, because A) they have nice buttons to allow donations B) dont have any hassle with it. Point B) is fading recently, because paypal likes to freeze those accounts arbitrarily.
    Flattr is already providing point B), and point A) partically (flattr-button and the possibility to donate on the flattr page itself, as qnrq mentioned).
    I am shure that this would boost the usage of flattr with the nice side effect, that more people have a flattr account and use the flattr spirit & service in their daily web surfing sessions.

  13. Daniel says:

    edit: …love to get donations *dont* want to integrate…

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