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Paypal freezes 50% of Yatagarasu Attack on Cataclysm! funds

UPDATE: Paypal says the issue has been resolved


According to a Paypal spokesperson this morning the issue with Nyu Media has been resolved, and the payment provider is working on improving its practices when it comes to crowd-funding.

We want to reiterate that supporting these campaigns is an exciting new part of our business. We are working closely with industry-leaders like IndieGoGo and adapting our processes and policies to better serve the innovative companies that are relying on PayPal and crowd funding campaigns to grow their businesses.

We never want to get in the way of innovation, but as a global payments company we must ensure the payments flowing through our system around the world are in compliance with laws and regulations. We understand that the way in which we are complying to these rules can be frustrating in some cases and we've made significant changes in North America to adapt to the unique needs of crowd funding campaigns. We are currently working to roll these improvements out around the world.

Original story

The developer of Yatagarasu Attack on Cataclysm! is currently battling Paypal after it refused to release 50 per cent of its Indiegogo funds.

"The email from PayPal advises us that they have 'reserved' the funding and will release 'up to 50% of the funds' before Yatagarasu AoC is released and the rest only after they have verified copies of paid invoices," reported Nyu Media founder Seon King.

"What's more, they provide no option to discuss, stating we should 'contact us closer to the release date beginning of next year' to arrange release of the funds."

The successful Indiegogo campaign closed on August 11 with $118,243 raised. 3585 people backed the 2D fighting game, but King warned that Paypal's behaviour could potentially derail development of the project.

Nyu Media is still hoping to make contact with Paypal's customer service team in order to resolve the problem, and has asked its backers to contact Paypal to bring the problem to attention. If this does not work, it will consider refunding the Paypal donations and finding funding from alternative sources.

"To add insult to injury, not only do Nyu Media and the Yatagarasu developer team have rock solid track records, but we've already provided PayPal with documents providing the bona fides of Nyu Media, the developer, and the campaign."

This, noted King, is not the first time that Paypal has caused strife for indie developers. In April Skullgirls developer Lab Zero Games was unable to pay staff after Paypal froze the account holding its Indiegogo funds over fears fans could potentially demands refunds from Paypal if they weren't happy with the final game.

Goldhawk Interactive also faced problems in 2011 when it used Paypal for pre-orders of its debut title Xenonauts.

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Latest comments (9)

Ruben Monteiro Engineer 8 years ago
Only thing I find incredible is that the mafiosi that run this organized crime scheme called PayPal still aren't behind bars.
10Sign inorRegisterto rate and reply
Alex Bunch Proof Reader, ZiCorp Studios8 years ago
They are not classed as a financial institution and are therefore not under the same regulations as banks etc.
It's an absolute joke. And PayPal is owned by that other top rip off merchant... eBay.
4Sign inorRegisterto rate and reply
Tyler Moore Game Designer & Unity Developer 8 years ago
I don't understand why this keeps happening. Is PayPal not aware that the spirit of these transactions are donations, and not purchases? What am I missing?
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Show all comments (9)
Andrew Jakobs Lead Programmer 8 years ago
huh? donations/payments have been made to the paypal account, but paypal isn't shelling out? It's non of their business, if the money is in the account they should just pay out.. Wonder why anyone would use paypal anyway, especially after stories like this.. If it was Indiegogo that would not pay out then it would be another matter, but paypal isn't anything more than a bank..
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Steve Nicholls Programmer 8 years ago
PayPal do this quite a lot. Saying that I don't believe you should pay company wages with crowd funding as one company did in the article.

Edited 2 times. Last edit by Steve Nicholls on 10th September 2013 5:28pm

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James Berg Games User Researcher 8 years ago
Good news: "I’m relieved to announce that today we received an email from PayPal's ‘Office of Executive Escalations’, advising us that they have released all reserve funds and removed all reserve settings from our account."

Andrew, Paypal isn't a bank, which is why they can do stuff like this. Paypal always takes the side of the buyer, not the seller, and using it is always a calculated risk. When I ran my own business and was shipping things to people, if someone claimed something didn't show up in the exact condition I described, Paypal would give them a refund.
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Anthony Chan8 years ago
LOL give us the game we want, the way we want to play it, when we want to play it, how we want to play it... and maybe we won't ask for a refund. Paypal mitigates risk because as James stated they protect buyers more than sellers.

I don't understand why indies resort to paypal when it is them who are unable to certify their product will be satisfaction guaranteed.
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Adam Campbell Product Manager, Azoomee8 years ago
PayPal do this quite a lot. Saying that I don't believe you should pay company wages with crowd funding as one company did in the article.
Skilled staff are expensive.

Being able to sustain the lives of your development team whilst they put time and effort into a product is surely a good enough reason? For teams this small wages are probably the biggest expenditure. Funding is funding, only difference here is the method (crowd).

If PayPal feel it necessary to withold funds because 'users might not like the product and ask for a refund' they need to review their systems and guidelines.
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Shaun Farol Studying Computer Information Systems, California Polytechnic State University8 years ago
Again this is a cost of doing business when it concerns PayPal. There is a reason Kickstarter doesn't support PayPal payments and this is one of them. By using IndieGoGo you are taking on the systemic risks of using that platform. This isn't the first time PayPal has frozen crowdfunding funds and I doubt it will be the last. To go through PayPal without understanding these risks is a failure of the campaign starter more than anyone.

PayPal lives and thrives under its assurances that the online marketplace is not the wild west and that it can assure its customers that you are safe buying online and using their payment system. Without trust PayPal is nothing and ultimately being able to assure their customers that they are not being scammed is fundamentally more important to them than any one game's money.

Choosing how to fund one's product and what crowdfunding platform you use if you choose to go that route is more than just a comparison of fees. When I launched my own crowdfunding campaign I did extensive research into all the options available to me and weighed them all in before finally deciding Kickstarter was the right one for my project.

Edited 1 times. Last edit by Shaun Farol on 11th September 2013 3:49am

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