Skullgirls funding held by Paypal

Crowdfunding meets Paypal and the results aren't pretty

Earlier this morning Skullgirls developer Lab Zero Games was faced with the inability to pay its employees, despite an IndieGoGo funding campaign that totaled $829,049. The problem stemmed from PayPal, the money-transfer service used for most of the backer contributions. PayPal froze Lab Zero's account because it feared a large number of chargebacks if backers didn't get their favorite characters in the final DLC roster.

"Paypal's freeze on our account is making it so that I can't pay people today," wrote Lab Zero chief executive officer Peter Batholow on NeoGAF. "I am pretty f***ing pissed. I sent them all the documentation they asked for last night, hoping it would be resolved today, but didn't hear anything back. I also immediately filed a complaint with the [Consumer Financial Protection Bureau] because this whole thing seems decidedly non-kosher."

PayPal wanted Lab Zero to take on the risk if a large number of backers requested chargebacks, but Bartholow declined. Bartholow said he spoke to developers at inXile - who successfully funded Wasteland 2 and Torment: Tides of Numenera through Kickstarter - and they said that Amazon Payments did not have the same issues as PayPal.

"They also asked if we're good for the $700,000 if something goes wrong. I said 'No,' because, well we're not?" Batholow wrote. "The whole point of crowdfunding is to give us the money to develop stuff, not take out a loan."

PayPal later unfroze the account, but decided to hold $35,000 as collateral. Fan voting for the the final DLC characters is still ongoing on the Skullgirls Facebook page, and the uncertainty is still heavy on PayPal's mind.

"Paypal called me today to inform me that the restrictions on my account had been lifted, so I can get back to paying our contractors today," Bartholow told VentureBeat. "I think this is still pretty sketchy and have filed a complaint with the Consumer Financial Protection Bureau, so hopefully that will become unrestricted in the near future. But now that we have unrestricted transfers on Paypal again, we shouldn't need that money anytime soon if they can't be convinced to release it."

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Latest comments (10)

Sam Van Tilburgh Chief Discovery Officer, 22 Cans9 years ago
We have exactly the same problem at 22cans, like-for-like - and PayPal is refusing to be of any help. They have the money in their account, we are unable to get access to it.
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Iain Stanford Experienced Software Engineer, Tinderstone9 years ago
Its reasons like this as to why I have always refused to ever use Paypal.
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Thomas Dolby Project Manager / Lead Programmer, Ai Solve9 years ago
I'm never going to use PayPal for any large amount of money, I hear too many of these stories.
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Show all comments (10)
Tyler Moore Game Designer & Unity Developer 9 years ago
Goes to show, if there's a pile of money, everyone will try to dip their hands in it.
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Andrew Goodchild Studying development, Train2Game9 years ago
I presume this is why Kickstarter use Amazon?
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Anthony Chan9 years ago
I am not sure why anybody would use Paypal for a funding structure - and this is not a knock against Paypal. Paypal is extremely vigilant on behalf of buyers. Because credit cards allow chargebacks if consumers claim they purchased something online that was not to their expectation, and Paypal honors this... It makes sense what they are asking of Lab Zero.

The worst part is Lab Zero from the sounds of the article cannot guarantee the product will be of everyone's expectation. Nor can they cannot guarantee refunds since they do not have that cash flow... Which is also fair on Lab Zero.

Just doesn't make sense using Paypal at all in this situation.... Paypal was never a funding conduit for venture capitalism.
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James Berg Games User Researcher 9 years ago
Paypal always focuses on buyer protection, and always have. The onus is always on the seller or provider of service to prove that the goods sold were as-described, etc.
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Ruben Monteiro Engineer 9 years ago
Yes, I'm sure Paypal does this to protect the buyer. How considerate of them.
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Paul Jace Merchandiser 9 years ago
A number of years ago a similiar situation happened with a person who was doing a fundrasier for charity to support victims of some type of natural disaster. They raised atleast $80,000 but paypal wouldn't let them use the money to help the victims because they thought(wrongly) it was a scam. So everyone's money was refunded and the victims of the natural disaster got no relief support from him.
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Tim Carter Designer - Writer - Producer 9 years ago
Anthony Chan you're clueless.

Crowdfunding isn't "venture capitalism". Crowdfunding is DONATING! For the very reason that what is being done is high risk.

If a person DONATES and they don't understand this, then they're an idiot!

Edited 1 times. Last edit by Tim Carter on 15th May 2013 5:23pm

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