This seems like a pretty clear-cut case. The Coinpal creator didn't do his homework, and PayPal acted well within its stated policies to protect its business.

This seems like a pretty clear-cut case. The Coinpal creator didn't do his homework, and PayPal acted well within its stated policies to protect its business. The Coinpal creator chose to email Paypal to ask a question that is clearly answered in the company's acceptable use policy. Under Prohibited Activities, Section 3(f): "You may not use the PayPal services for activities that (...) are associated with the following Money Service Business activities: (...) currency exchanges. Second, the operator expresses in his post that he had kept his agreement to keep chargebacks low, at 0.9%. Consider for a moment that PayPal and the credit card company are splitting somewhere around 3% of the transaction amount to cover all of their expenses and make a profit. Let's assume that, out of 100 transactions for $100, one gets charged back. If it costs the companies $50 to investigate the customer complaint and process the chargeback, then the combined companies are losing 16% of their revenue to cover chargebacks.