The Horror Story

Warning this could happen to

YOU

THIS COUNTRY'S BIGGEST "PONZI" AND YOU,

AS CUSTOMERS ARE UNPROTECTED

On about September 14.2000, an internet friend sent me money through paypal so I opened an account with Paypal (I had to to get the money). At that time I liked paypal's way of banking on the internet and the account was for the purpose of transferring moneys to people or business programs I wanted to get into on the Internet. Somewhere around Oct. 15.2000 an Internet friend suggested that people were having trouble funding there e-gold accounts and it might be a business I might think about. As a semi-retired businessman, not able to work, because of a heart condition and diabetes, I researched this and found that many of the people needing there e-gold accounts funded had paypal accounts also. Subsequently I opened an e-gold account and funded it with a thousand dollars. I started advertising on my web page that I could help people change their dollars into gold. Business started to move slowly until people realized that I made fast transactions through Paypal and I was honest. My reputation grew rapidly and soon I was doing $200,000.00 a month in transactions with Paypal alone. Somewhere around Christmas I got a charge back notice saying that I was in receipt of potentially fraudulent funds. They "Paypal" asked for certain information in regard to the account named, which I provided. Not hearing back from them I called customer service and they said it was under investigation. As time went on day by day these transactions kept coming in to the tune of over $20,000.00 worth of so-called fraudulent funds "stolen credit cards." My calls to Paypal only resulted in being passed from one clerk to another with no results. When I did finally get to middle management personnel all I received was a canned speech but no help. They "Paypal" accepted the credit cards and in return sent me a confirmation e-mail stating "you've got cash." The money was in their accounts and three to six weeks later Paypal is saying the accounts were no good. I checked some accounts and found this to be wrong. These people proved that Paypal had debited their accounts and had their monies.

In late January they gave me another support number to call saying I had a "red carpet" account, that way I could speak with management people, a week later they froze my account. This did not allow me to make any transactions but allowed people to make deposits into my account, which I requested be stopped until our problem was resolved. They refused to do this and took other peoples money to satisfy the negative balance in my account. I requested this by email and phone on February 5. My account became positive and they opened it. I started transferring gold into my customers accounts again trying to catch up and then they "locked" my account. As of today they have me +$20,000.00 out of pocket money and a negative balance of somewhere in the $9,000.00 range.

Now they are e-mailing my customers saying they should file fraud charges against me. Also telling them that they have had many complaints against my account and basically that I'm the crook. My customers are behind me and now send me monies in other ways. IE.C2it,western union, money gram, cashiers check and bank wires.

My point is Paypal is not what they say they are. As a supposed financial institution or so, the only thing they are concerned with is getting accounts which adds up to transaction fees regardless of whether they are legitimate or not. I now see that their policies are strictly set up to protect themselves not there legitimate customers. Their security is at best nonexistent.

1. I did not accept the accounts THEY DID

2. I did not have access to there bank accounts or credit cards. THEY DID

3. I kept my commitment to my customers THEY DIDN'T

4. I researched what accounts I could and proved them wrong THEY DIDN'T

In conclusion I believe they are a young company with growing pains and I believe they should be responsible for their mistakes. If they do not wish to come to satisfactory terms then my only recourse will be to take legal action against them and vigorously inform those on the Internet as to my situation so this does not happen to them

UPDATE:

After many hours of telephone conversations with a Mr. Sandeep Lal, Paypal's representative, my ACCT now is $31,083.45 in arrears and my negative balance has grown to $12,922.63. Each time paypal sends monies back to a customer that sent me money after I asked that they block my account from accepting monies they raise the negative balance. Mr. Sandeep tells me that paypals board of directors would like to have me as a customer and would agree to let me payoff the negative $12,900.00 over a 6 month period. WOW THAT'S MIGHTY NICE OF THEM. They also tell me that as in the past I would be responsible for those accounts that wanted to claim a charge back anytime within a 3-6 month period, and as I was before charge backs from an account that received funds through 2-3 other accounts that were charged back.

WHEW they have some system of accounting and here are some examples.

In February I received these contacts from my customers

One customer sent me a fax showing his credit card statement showing 2 transactions charging him for monies he sent me PAYPAL CHARGED THEM BACK ON ME.

Another told me her husband made the transfer and she called paypal. NOW SHE DOESN'T HAVE THE MONEY AND I DON'T, THAT LEAVES ONLY ONE PLACE THE MONEY IS AT "PAYPAL".

Another called me from Alaska to tell me his funds were "legit".-----It was only $56.50 from his "VERIFIED" account and a verified shipping address.

Another called to tell me that his was made by credit card but paypal debited his checking account creating a negative balance in his account which cost him $40.00 service charge.

Another customer emailed me to tell me that when he inquired as to why they deemed his funds to be "fraudulent" they closed his account and would not answer emails to them as to why it was closed.

They "PAYPAL" have consistently took other peoples money to payback supposedly "FRAUDULENT FUNDS" and then charged me for them when I told them I would file theft of funds charges against them.

By the way, in one of the conversations I had with Paypal's representative I was actually asked to help them in investigating these accounts.

What I can't believe is that in this day and age of government regulations they are seemingly unregulated and can change their "terms of service" as they see fit to protect themselves, with total disregard to their customers.

I guess I have no other choice at this time but to seek the help of my attorney generals office as well as my lawyer. In the mean time I will diligently use my time to try and notify my fellow Internet friends and their friends of the possibilities of doing business with this unregulated Internet entity.

SEE Damien Cave's article FEB.23,2001 ( salon.com )

I ask you is this not slander at it worst---"While I doubt this person [Brody] is engaged with the Russian mafia, I don't think [he and other e-Gold merchants] are totally innocent either," Thiel says. "They certainly know that much of the money they're receiving is from suspicious sources."

UPDATE -March 1 2002

Well folks we went to arbitration on the 21st and 22nd of January and the decision is due at the latest on the 4th of April. As I sit here today, I'm asking myself "WAS IT WORTH IT". Well yes and no. Yes, because most of my 60 yrs. I've believed that when you feel your in the right you fight for a principle, as most of you have. We don't know whether we won our case yet, but I do now know that principles come at a high price. The agony that Hanna and I have gone through in the past 14 months is priceless. We have over 95k in credit card debt,14k of which went to the American Arbitration Association, (in a court it would have cost less than 1k) over 4k traveling to San Francisco. Legal fees have exceeded 100k and I still owe my attorneys over 30k. A year and a half ago we were trying to prepare to retire. Thanks to paypal we now are looking at possibly losing our home as well as everything else we've worked for all or lives. Paypal has filed a protective order on the case, I guess they don't want you to be able to make a judgment for yourselves. Ignorance of their ways is power. If a court finds me in violation of this ridiculous order then so be it. At least I will go to jail knowing I have done my best to warn my fellow Americans of the possible pitfalls of doing business with them. I have come to the realization that terrorism does not just rest in the hands of ben laden, (he will kill you), but Peter, Max, Reid and the staff of paypal will make you feel like like a bomb has leveled you. By the way, when Peter Thiel was suppose to testify at my hearing he didn't have the intestinal fortitude (GUTS) to show up. One question remains, why would paypal spend over 350k of your money trying to get 18k out of me.

Well the verdict is in. Paypal forced us into arbitration and we lost. Well we did get $5,000.00 taken of the $18,976.29 under the seller protection program, which means we only owe paypal $13,976.29 + $784.97 interest and $312,213.50 in attorney fees and $26,703.91 in paralegal fees. So much for a simple contract dispute and doing business with them.

Update- Sept. 5, 2002

Just 5 days after a Federal Judge in California ruled Paypal's user agreement and arbitration clause "unconscionable" and 16 days short of 9 months, the arbitrator finally decided to hand down his final award. Seems he was unable to award Paypal their $338,917.41 in legal fees. So what he did was split his fee of $23,973.84, 30% Paypal and 70% us. So actually we owe the arbitrator more than we owe Paypal. (APP. $16,800) I guess he strung out the decision for 9 months so he could run his fee up.

We were forced into arbitration. we were trying to settle our differences and had refused their one sided offers, which mainly included that we not reveal anything that happened. This would have prevented us from telling others our experiences and how to prevent it from happening to them.
What we found yesterday was that they needed to have 3 lawyers and two paralegals to prove their case. Their case according to their primary lawyer was "a simple contract dispute".
Being forced to seek legal counsel, after we found out they had started proceedings against us, we hired an attorney in Texas, because the arbitration was in California we needed one there also.
This simple contract dispute resulted in tens of thousands of pages of documents.
Their contention was simple, if you used a credit card to send someone money and they sent it to someone else who sent it to another, all through their accounts we was responsible to pay paypal back. Also if paypal took a credit card that failed the address verification check, which happened twice on one account we were responsible. Now answer this one, one of our customers sent 3 separate transactions, all with the same credit card the first transaction was reversed, but the others were not.
Basically what ever happens, paypal is not responsible. They operate outside of banking regulations and do not protect anyone, but themselves. This we believe is against consumer law because as a merchant they have a responsibility to their customers.
The arbitration process is, to say the least, a violation of a persons right to a fair and impartial trial. The arbitrator in our case was a well-known San Francisco corporate lawyer. Because we did not have a lawyer at the time, we had no choice. To our dismay, after returning from arbitration in San Francisco, we found on the Internet where a corporate lawyer from New York wrote that arbitration favors the big corporations 95+% of the time.