A class-action lawsuit is accusing the digital payments company of violating racketeering laws by freezing customer funds without an explanation.
The lawsuit says that when users contacted the company about the frozen funds, they were told they had violated the company's "acceptable use policy" but weren't told how. It claims that in at least one instance, a user would have to get a subpoena to find out why.
The lawsuit says thatPayPal violated its own agreement by failing to give adequate notice to users whose accounts have had hold placed on them. It does not inform users why funds are being held, how they can obtain a release of the hold, and/or how they can avoid future holds being placed on their accounts, when they are told by PayPal.
After a 180-day hold period, it says that PayPal takes the money for itself. The complaint says that the user agreement and acceptable use policy cannot be used as a license to steal.
It's not possible to reach a live person.
The three lead plaintiffs claim that they had a large amount of money seized by PayPal. Shbadan Akylbekov ran a store that sold hyaluron pens, which are filled with hyaluronic acid and used to reduce wrinkling. He said that his wife's account was taken from with no explanation. He was finally told that the seizure was for the damages caused by the use policy violations. He says he never received a copy of the policy until his account was restricted.
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The funds were used to reimburse customers who had purchased hyaluron pens from his store. The customer who requested refunds was asked to see documentation. The report would be available within two days according to the customer service representative.
Akylbekov was told that he had to pay taxes on $162,517.19. PayPal claimed a deduction for an expense that it never paid. The lawsuit claims that the IRS was only told of $162,517.19 of the $172,206.43 seized by PayPal.
Roni Shemtov says that she was given three different explanations for why her account was taken from her. The first customer service representative said that she had violated the acceptable use policy by using the same computer and address as other users. Shemtov denies that she violated the AUP by holding multiple PayPal accounts. A third person said she ran afoul of the policy by selling yoga clothing at a lower price.
Shemtov was told by the IRS that she owed taxes on the funds that were seized.
The third person to say they had been taken from their account was Lena Evans. Evans used her account on eBay to buy and sell things, and to operate her nonprofit, which seeks to increase the number of women who play poker. She says that the seizure was not explained by PayPal. She tried to reach a live person but was never able to, according to the lawsuit.
Ars has asked for a response from PayPal.
The damages are triple.
Chris Moneymaker, a professional poker player, won the 2003 World Series of Poker. Moneymaker said that he was threatened with a lawsuit by the company after they placed a hold on his money. He said that anyone else who got funds taken from them should contact his lawyers who are starting a class action suit.
The class members are being sought for triple damages.
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