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How Diaspora Found Its Tiger Stripe in the Midst of a Paypal Fiasco

72 points by postfuturist 15y ago

dangrossman 15y ago
"When PayPal mysteriously and arbitrarily decided to freeze everyone’s donations..." "...We had raised $45,000 in just a few days, and then PayPal froze our account." Not so mysterious. Believe it or not, no payment service is going to allow you to collect tens of thousands of dollars in a few days with just a name and an e-mail to identify you. The criminal abuse would be rampant. If that doesn't raise the red flags at the risk department of any processor they'd be out of business in no time. Just another rehash of the same story we've seen on HN a dozen times this year, as recently as ~2 weeks ago with the game developer taking preorders for an undeveloped game -- who eventually satisfied PayPal and later wrote a post about how Google Checkout was worse and PayPal was not so unreasonable after all. "Yes, you heard that right. PayPal gets to earn interest on all of our donations for 6 months" If PayPal's agreements with its underwriting banks are anything like the rest of the merchant processing world, then reserve accounts are always non-interest-bearing to prevent any incentive to create them without proper justification.
- pc 15y ago
  "Believe it or not, no payment service is going to allow you to collect tens of thousands of dollars in a few days with just a name and an e-mail to identify you." Using the email address and name is hardly the best way to evaluate the trustworthiness of Diaspora. There are lots of reasonable questions about how to scale underwriting systems, and how this might work generally, but we shouldn't neglect the fact that in this particular situation 1) Diaspora not being able to receive donations is a bad outcome, and 2) there isn't exactly a paucity of public information about them.
  - dangrossman 15y ago
    For all PayPal knows at the point they freeze the account, it's some teen in Romania that has no connection to the project and is using its name to collect donations for personal use. First they have to stop the potential fraud from growing even more damaging to them by freezing the account, then they need to figure out who they're really working with, then they need to evaluate the risk of accepting those payments.
    - pc 15y ago
      From the post: "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." It seems that Diaspora weren't unwilling to verify their identity.
      - dangrossman 15y ago
        Yes, although the blog post that their account was frozen is dated yesterday, so who knows if anyone at PayPal has even had a chance to review it yet. That indie developer (I forget their name to look it up again) had also posted on their blog that their account was closed, then a few days later PayPal reversed itself and reopened it -- that may still happen here. I hope it does, as on its face Diaspora doesn't seem like an organization that would attract too much risk.
- fungi 15y ago
  > with just a name and an e-mail to identify you. try harder. from TFA: 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.
  - dangrossman 15y ago
    That's a bit of a rude way to start a response. First, PayPal had zero verified information about the identity of the account holder at the point the account got frozen. The information Diaspora sent happened after PayPal requested it when their huge increase in incoming funds triggered the account review. That was posted just yesterday, PayPal probably hasn't even had a chance to look at whatever they sent yet. Second, this same comment was already made and responded to an hour ago.
    - fungi 15y ago
      > That's a bit of a rude way to start a response. your right, sorry.
VonLipwig 15y ago
Hmm, all sounds a bit strange. While I don't approve of PayPal freezing payment's I can kind of get it with a conference which may or may not take place. They need to protect themselves from having to hand out potentially thousands of dollars in compensation. What I don't get is why they would freeze an account getting donations. It is a donation. You are not paying for a service which may or may not arrive. Seem's very very strange.
- dangrossman 15y ago
  Money laundering. Selling illegal products or services in the guise of donations. Posing as an organization you're not even affiliated with to ask for those donations. Just because someone, who PayPal only knows as a name and an e-mail address, claims to be taking donations does not mean that's actually what's going on. When those donations go from $0 to $45,000 in a few days, it behooves them to identify that customer and check out exactly where all that money is coming from and what risk is associated with it. Even if they are bonafide donations, if there are expectations attached to those funds (that the company is going to build a product or perform a specific service, or put it towards a certain cause) and there's a risk those expectations won't be met, then there's a risk for PayPal that some of those donors are going to be upset and do something about it -- like cry fraud and charge back the payments. PayPal has to carefully manage its chargeback rate like every other merchant.
  - kseudo 15y ago
    How do flattr get around this problem? They use paypal and it looks like they could be used for money laundering
    - dangrossman 15y ago
      By not having a huge spike in volume on a new account, providing information about the business to PayPal at some point, and by having a track record of low risk. It's not a problem to open a PayPal account and start accepting payments, it's only a problem to do that, not have any verified information in your account yet, then also do something to raise red flags. And for most people, even when that happens, once you give PayPal enough info to convince them you're not doing something shady, they'll unfreeze the account and you take payments without a problem for years after.
pork 15y ago
Oh come on people, it's not a fiasco. Has nobody watched Breaking Bad? Money laundering!
- Estragon 15y ago
  Obviously, the solution is bitcoin.
Raphael 15y ago
Just shows the naïveté of the Diaspora team. No surprises here.
- Joeboy 15y ago
  Is expecting Paypal to give you your money really that naïve?
  - bigiain 15y ago
    Yep. If you're not shipping physical products within a day or two of accepting the money, and shipping them via a service which allows you/your customer/paypal to track the deliveries, then you're in the category who should expect Paypal to decide to hang on to any money put into your account. Surely anybody who's got access to Google can find that out before getting caught out by it?
    - Joeboy 15y ago
      Googling "paypal donations" doesn't immediately yield that information. My expectation would be that since Paypal advertises a donations service, they probably provide one, and that it probably ought to result in you being able to collect your donations.
      - ebaysucks 15y ago
        Sure, if you are in fact a non-profit. Everybody is allowed to receive the occasional donation (pretty generous of Paypal, as they don't charge commission on that), but if you build a "business of receiving donations" you need to proof you are a non-profit. It's that obvious.
    - tonybaldwin 15y ago
      Paypal doesn't know if you ship or not. I provide a service (translation) for which I am frequently paid via paypal, especially from foreign clients, and can receive several thousand dollars a month (not every month, but most, anyway) without shipping anything (just delivering documents via e-mail, which paypal doesn't see). They've made me a "premium member". I receive probably some 80% of my income via paypal.
citricsquid 15y ago
The most mysterious thing is that people actually donated to diaspora? If we've seen what they can achieve with $200k I somehow doubt $40k is going to get us more than... nothing. > Obviously, PayPal’s behavior is unacceptable, which is why we have asked our lawyer to get involved. oh wait, that's where any money is going to go.
- Joeboy 15y ago
  I agree that they weren't the ideal recipients of $200k, but they have produced a fairly functional and usable product. I don't understand the hate they get on HN.
  - k-mcgrady 15y ago
    The problem is that most people haven't seen the product. I asked for an invite the day they opened them and still haven't gotten one. It has taken them that long that I won't be using it now. Facebook's timeline is great and Google+ is also a good network.
    - Joeboy 15y ago
      Yes, I have no idea why they're shooting themselves in the foot like that. You can sign up and use the product at lots of other places though (see http://podupti.me/ http://podupti.me/ for options).
    - Andrenid 15y ago
      Same here. I've had my email in the "invite waiting list" since they first published the form. I've had many a "You're important to us, and we promise an invite is coming soon, but in the mean time, can you donate some money?" emails, but no word of an invite. I've now given up and moved on, not really interested in them anymore and won't take up the invite if offered.
    - sp332 15y ago
      The point of the project is that you can have an account on any Diaspora server and communicate with any user on any other server, seamlessly. You don't need an account on the "joindiaspora.com" server, you can get an account on any of these servers: http://podup.sargodarya.de/ http://podup.sargodarya.de/
ohboy 15y ago
As a business owner who once had their Paypal account frozen (mistakenly, but frozen nonetheless) 10 years ago and now does $10,000+ every month through Paypal I can say they're doing something wrong. Paypal doesn't need to steal money, they make billions a year, they don't need your $45,000. Something smells rotten and it's Diaspora. $200,000 and over one year later and they have nothing to show for it and they're still begging for money. They promised a finished product for $10,000, they received $200,000 and they're still not done. Why are people still giving them money? If a contractor said $10,000 to replace my roof and I gave him $200,000 and he came back saying he needed more I'd call the police and sue, not give him another $45,000 So what happens when they get another 20k or 60k or 200k and they say "oops that's not enough", everyone gets a refund? Or does Diaspora walk away? Or do they hold another donation round in a year? Sooo disappointed in Diaspora, so many startups could have been created with $200k but they burned the money and now they're back asking for more, like watching a homeless guy buy alcohol with the 20 you just gave him and he comes back asking for more money. Zuckerberg was just an average programmer and he made Facebook with almost no funding while attending college, these four get $200,000 and make nothing. I'd love to know what these donators are thinking, can anyone give me a good reason why it's a good idea to keep giving Diaspora money when they already show no progress from the first $200,000 they were given? If you're a donator how will you feel when they receive another 20 or 200k and Diaspora is still a flop?
- Joeboy 15y ago
  > can anyone give me a good reason why it's a good idea to keep giving Diaspora money I haven't, but from what I can see, if you want a distributed Facebook alternative Diaspora is, for all its faults, really the only game in town. In the real, non-HN world it has buzz way beyond Appleseed, Friendika et al. An impressive number of my non-tech friends are excited about Diaspora, and don't have a clue about its competitors.
  - tonybaldwin 15y ago
    Diaspora, which I am using and do like, is definitely not the only game in town for decentralized, federated social networking. Friendika is, in my opinion, more mature and has more features, better federation with other networks, and is also widely used, mostly in Europe and Brazil, but there are also "pods" based in the US and Canada. It's great stuff, and is even federated with Diaspora (the two networks see each other's sites as pods on their own network). Diaspora does seem to have gotten more press. I haven't quite figured that out, but it's likely due to their funding?
jsavimbi 15y ago
The Diaspora crew suffers from Münchausen syndrome.
shareme 15y ago
I have a paypal question..What happens when you plan ahead and supply paypal with additional information such as incorporation papers, etc when setting up a new account?
diaspanon 15y ago
Diaspora is up and running and is it is a great project. They are non-commercial, do not sell your info, and survive on donations and grants. Everyone should open a free account and donate if they like what they see. https://diasp.org/ https://diasp.org/ No invites needed. Please boycott someone else.
iridesce 15y ago
Wow, lots of talk here about a service that none seem to have used. You all are probably way more involved in creating software and doing private finance than I will ever be, so I can't speak to those areas. I've been using Diaspora for about a month now - maybe a little while longer and while there are growing pains, I've been really impressed with the way the service works. While there are lots of people who use Diaspora and Facebook, I ( hopefully ) deleted my Facebook account as I got tired of being the product and use Diaspora exclusively. And like I said, I'm no tech guru. Any operational questions that I posted were answered promptly and courteously. The folks there are still claiming its alpha, and it works pretty well for me. Oh, and to the registration question - I Scroogled ' diaspora pod ' and the first listing was for https://github.com/diaspora/diaspora/wiki/Community-supported-pods https://github.com/diaspora/diaspora/wiki/Community-supporte.... The fourth listing is the pod that I belong to diasp.org - I had no problem signing up the first day I tried. Try it for yourself and then let us know what you thought

72 points by postfuturist 15y ago

"When PayPal mysteriously and arbitrarily decided to freeze everyone’s donations..." "...We had raised $45,000 in just a few days, and then PayPal froze our account." Not so mysterious. Believe it or not, no payment service is going to allow you to collect tens of thousands of dollars in a few days with just a name and an e-mail to identify you. The criminal abuse would be rampant. If that doesn't raise the red flags at the risk department of any processor they'd be out of business in no time. Just another rehash of the same story we've seen on HN a dozen times this year, as recently as ~2 weeks ago with the game developer taking preorders for an undeveloped game -- who eventually satisfied PayPal and later wrote a post about how Google Checkout was worse and PayPal was not so unreasonable after all. "Yes, you heard that right. PayPal gets to earn interest on all of our donations for 6 months" If PayPal's agreements with its underwriting banks are anything like the rest of the merchant processing world, then reserve accounts are always non-interest-bearing to prevent any incentive to create them without proper justification.

pc 15y ago
"Believe it or not, no payment service is going to allow you to collect tens of thousands of dollars in a few days with just a name and an e-mail to identify you." Using the email address and name is hardly the best way to evaluate the trustworthiness of Diaspora. There are lots of reasonable questions about how to scale underwriting systems, and how this might work generally, but we shouldn't neglect the fact that in this particular situation 1) Diaspora not being able to receive donations is a bad outcome, and 2) there isn't exactly a paucity of public information about them.
- dangrossman 15y ago
  For all PayPal knows at the point they freeze the account, it's some teen in Romania that has no connection to the project and is using its name to collect donations for personal use. First they have to stop the potential fraud from growing even more damaging to them by freezing the account, then they need to figure out who they're really working with, then they need to evaluate the risk of accepting those payments.
  - pc 15y ago
    From the post: "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." It seems that Diaspora weren't unwilling to verify their identity.
    - dangrossman 15y ago
      Yes, although the blog post that their account was frozen is dated yesterday, so who knows if anyone at PayPal has even had a chance to review it yet. That indie developer (I forget their name to look it up again) had also posted on their blog that their account was closed, then a few days later PayPal reversed itself and reopened it -- that may still happen here. I hope it does, as on its face Diaspora doesn't seem like an organization that would attract too much risk.
fungi 15y ago
> with just a name and an e-mail to identify you. try harder. from TFA: 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.
- dangrossman 15y ago
  That's a bit of a rude way to start a response. First, PayPal had zero verified information about the identity of the account holder at the point the account got frozen. The information Diaspora sent happened after PayPal requested it when their huge increase in incoming funds triggered the account review. That was posted just yesterday, PayPal probably hasn't even had a chance to look at whatever they sent yet. Second, this same comment was already made and responded to an hour ago.
  - fungi 15y ago
    > That's a bit of a rude way to start a response. your right, sorry.

VonLipwig 15y ago

Hmm, all sounds a bit strange. While I don't approve of PayPal freezing payment's I can kind of get it with a conference which may or may not take place. They need to protect themselves from having to hand out potentially thousands of dollars in compensation. What I don't get is why they would freeze an account getting donations. It is a donation. You are not paying for a service which may or may not arrive. Seem's very very strange.

dangrossman 15y ago
Money laundering. Selling illegal products or services in the guise of donations. Posing as an organization you're not even affiliated with to ask for those donations. Just because someone, who PayPal only knows as a name and an e-mail address, claims to be taking donations does not mean that's actually what's going on. When those donations go from $0 to $45,000 in a few days, it behooves them to identify that customer and check out exactly where all that money is coming from and what risk is associated with it. Even if they are bonafide donations, if there are expectations attached to those funds (that the company is going to build a product or perform a specific service, or put it towards a certain cause) and there's a risk those expectations won't be met, then there's a risk for PayPal that some of those donors are going to be upset and do something about it -- like cry fraud and charge back the payments. PayPal has to carefully manage its chargeback rate like every other merchant.
- kseudo 15y ago
  How do flattr get around this problem? They use paypal and it looks like they could be used for money laundering
  - dangrossman 15y ago
    By not having a huge spike in volume on a new account, providing information about the business to PayPal at some point, and by having a track record of low risk. It's not a problem to open a PayPal account and start accepting payments, it's only a problem to do that, not have any verified information in your account yet, then also do something to raise red flags. And for most people, even when that happens, once you give PayPal enough info to convince them you're not doing something shady, they'll unfreeze the account and you take payments without a problem for years after.

pork 15y ago

Oh come on people, it's not a fiasco. Has nobody watched Breaking Bad? Money laundering!

Estragon 15y ago
Obviously, the solution is bitcoin.

Raphael 15y ago

Just shows the naïveté of the Diaspora team. No surprises here.

Joeboy 15y ago
Is expecting Paypal to give you your money really that naïve?
- bigiain 15y ago
  Yep. If you're not shipping physical products within a day or two of accepting the money, and shipping them via a service which allows you/your customer/paypal to track the deliveries, then you're in the category who should expect Paypal to decide to hang on to any money put into your account. Surely anybody who's got access to Google can find that out before getting caught out by it?
  - Joeboy 15y ago
    Googling "paypal donations" doesn't immediately yield that information. My expectation would be that since Paypal advertises a donations service, they probably provide one, and that it probably ought to result in you being able to collect your donations.
    - ebaysucks 15y ago
      Sure, if you are in fact a non-profit. Everybody is allowed to receive the occasional donation (pretty generous of Paypal, as they don't charge commission on that), but if you build a "business of receiving donations" you need to proof you are a non-profit. It's that obvious.
  - tonybaldwin 15y ago
    Paypal doesn't know if you ship or not. I provide a service (translation) for which I am frequently paid via paypal, especially from foreign clients, and can receive several thousand dollars a month (not every month, but most, anyway) without shipping anything (just delivering documents via e-mail, which paypal doesn't see). They've made me a "premium member". I receive probably some 80% of my income via paypal.

citricsquid 15y ago

The most mysterious thing is that people actually donated to diaspora? If we've seen what they can achieve with $200k I somehow doubt $40k is going to get us more than... nothing. > Obviously, PayPal’s behavior is unacceptable, which is why we have asked our lawyer to get involved. oh wait, that's where any money is going to go.

Joeboy 15y ago
I agree that they weren't the ideal recipients of $200k, but they have produced a fairly functional and usable product. I don't understand the hate they get on HN.
- k-mcgrady 15y ago
  The problem is that most people haven't seen the product. I asked for an invite the day they opened them and still haven't gotten one. It has taken them that long that I won't be using it now. Facebook's timeline is great and Google+ is also a good network.
  - Joeboy 15y ago
    Yes, I have no idea why they're shooting themselves in the foot like that. You can sign up and use the product at lots of other places though (see http://podupti.me/ http://podupti.me/ for options).
  - Andrenid 15y ago
    Same here. I've had my email in the "invite waiting list" since they first published the form. I've had many a "You're important to us, and we promise an invite is coming soon, but in the mean time, can you donate some money?" emails, but no word of an invite. I've now given up and moved on, not really interested in them anymore and won't take up the invite if offered.
  - sp332 15y ago
    The point of the project is that you can have an account on any Diaspora server and communicate with any user on any other server, seamlessly. You don't need an account on the "joindiaspora.com" server, you can get an account on any of these servers: http://podup.sargodarya.de/ http://podup.sargodarya.de/

ohboy 15y ago

As a business owner who once had their Paypal account frozen (mistakenly, but frozen nonetheless) 10 years ago and now does $10,000+ every month through Paypal I can say they're doing something wrong. Paypal doesn't need to steal money, they make billions a year, they don't need your $45,000. Something smells rotten and it's Diaspora. $200,000 and over one year later and they have nothing to show for it and they're still begging for money. They promised a finished product for $10,000, they received $200,000 and they're still not done. Why are people still giving them money? If a contractor said $10,000 to replace my roof and I gave him $200,000 and he came back saying he needed more I'd call the police and sue, not give him another $45,000 So what happens when they get another 20k or 60k or 200k and they say "oops that's not enough", everyone gets a refund? Or does Diaspora walk away? Or do they hold another donation round in a year? Sooo disappointed in Diaspora, so many startups could have been created with $200k but they burned the money and now they're back asking for more, like watching a homeless guy buy alcohol with the 20 you just gave him and he comes back asking for more money. Zuckerberg was just an average programmer and he made Facebook with almost no funding while attending college, these four get $200,000 and make nothing. I'd love to know what these donators are thinking, can anyone give me a good reason why it's a good idea to keep giving Diaspora money when they already show no progress from the first $200,000 they were given? If you're a donator how will you feel when they receive another 20 or 200k and Diaspora is still a flop?

Joeboy 15y ago
> can anyone give me a good reason why it's a good idea to keep giving Diaspora money I haven't, but from what I can see, if you want a distributed Facebook alternative Diaspora is, for all its faults, really the only game in town. In the real, non-HN world it has buzz way beyond Appleseed, Friendika et al. An impressive number of my non-tech friends are excited about Diaspora, and don't have a clue about its competitors.
- tonybaldwin 15y ago
  Diaspora, which I am using and do like, is definitely not the only game in town for decentralized, federated social networking. Friendika is, in my opinion, more mature and has more features, better federation with other networks, and is also widely used, mostly in Europe and Brazil, but there are also "pods" based in the US and Canada. It's great stuff, and is even federated with Diaspora (the two networks see each other's sites as pods on their own network). Diaspora does seem to have gotten more press. I haven't quite figured that out, but it's likely due to their funding?

jsavimbi 15y ago

The Diaspora crew suffers from Münchausen syndrome.

shareme 15y ago

I have a paypal question..What happens when you plan ahead and supply paypal with additional information such as incorporation papers, etc when setting up a new account?

diaspanon 15y ago

Diaspora is up and running and is it is a great project. They are non-commercial, do not sell your info, and survive on donations and grants. Everyone should open a free account and donate if they like what they see. https://diasp.org/ https://diasp.org/ No invites needed. Please boycott someone else.

iridesce 15y ago

Wow, lots of talk here about a service that none seem to have used. You all are probably way more involved in creating software and doing private finance than I will ever be, so I can't speak to those areas. I've been using Diaspora for about a month now - maybe a little while longer and while there are growing pains, I've been really impressed with the way the service works. While there are lots of people who use Diaspora and Facebook, I ( hopefully ) deleted my Facebook account as I got tired of being the product and use Diaspora exclusively. And like I said, I'm no tech guru. Any operational questions that I posted were answered promptly and courteously. The folks there are still claiming its alpha, and it works pretty well for me. Oh, and to the registration question - I Scroogled ' diaspora pod ' and the first listing was for https://github.com/diaspora/diaspora/wiki/Community-supported-pods https://github.com/diaspora/diaspora/wiki/Community-supporte.... The fourth listing is the pod that I belong to diasp.org - I had no problem signing up the first day I tried. Try it for yourself and then let us know what you thought