Diaspora accuses PayPal of blocking donations

Nicole Kobie October 19, 2011

Social network Diaspora has accused PayPal of blocking its account.

The social network is run on distributed servers, letting users keep control of their information – in the hope of avoiding the data privacy issues raised by rivals such as Facebook.

Diaspora claimed PayPal had “arbitrarily” frozen its account, without explanation.”We had raised $45,000 in just a few days, and then PayPal froze our account,” claims a post on the Diaspora blog. “Even though we’ve complied with every PayPal request, including providing them with our certificate of incorporation, it still won’t give us an explanation for any of its moves.”

The developers said PayPal sent Diaspora an email denying an appeal and locking down those donations for 180 days. “Yes, you heard that right,” the post continued. “PayPal gets to earn interest on all of our donations for six months, while we have to wait for PayPal to come up with a reason to justify its decision.”

“PayPal is notorious for arbitrary blocking of legitimate donations,” it added. PayPal drew criticism – and the unwanted attention of hackers – last year after blocking donations to Wikileaks.

The group plans legal action. “Obviously, PayPal’s behavior is unacceptable, which is why we have asked our lawyer to get involved,” it said.

It’s not all bad news, as Diaspora is now taking donations via payment start-up Stripe instead. “Stripe responded right away to our call for help and swung into action, helping us get our online donations capability back up and running in just a few hours,” Diaspora said. “In just a few hours, we got a whole new payment service installed.”

Update: PayPal has acknowledged that it did freeze the funds, but said Diaspora now has access to its donations again.

“We can’t comment specifically on the Diaspora account due to our privacy policy,” a PayPal spokesperson said. “However, we can confirm that the funds have been released and we are working directly with the account holder on this matter.”

PayPal said it sometimes freezes accounts for security or regulatory reasons. “At times, we may require a business or charity to hold funds in their accounts to ensure that they can refund their customers if there are a high level of complaints,” it added.