dwolla_vs_tradehill

Dwolla Begins PayPal-Style Account Suspensions

Within the Bitcoin community, payment processor Dwolla was pretty popular in its time. They were the preferred method of getting into and out of Bitcoin from the U.S. Dollar specifically because they claimed zero chance of chargebacks and appeared to be a small business run by decent people who weren’t necessarily Bitcoin-friendly but at least didn’t seem to be Bitcoin hostile. Since those early days, tension has built between Dwolla and Bitcoiners and may have just reached the point of no return: Dwolla has moved beyond closing the accounts of those it can prove are operating unlicensed exchanges and has begun closing the accounts of private individuals based on a mere affiliation.

It’s not just some random Bitcoiner they began with, either. On Wednesday, January 23rd Dwolla suspended the account of StompRomp founder Josh Harvey. Here are the circumstances:

  • Josh uses his Dwolla account to move funds in and out of MtGox, like many of us do.
  • Josh owed a little money to a personal friend who also uses Dwolla to move funds in and out of MtGox.
  • Josh sent the money he owed to his friend.
  • That’s it – no, seriously, that’s the entire reason his account was suspended, no more bullet points.

According to Dwolla, Josh’s account activity was suspicious and they’ve suspended his account claiming he was operating a Bitcoin exchange without the explicit permission demanded by their Terms of Service.

You understand and agree that you will not engage in the following activities:

  • Act as a marketplace and/or exchange for virtual currency products without prior written consent;

In the interest of fairness I contacted Dwolla to notify them that I was writing this article and to solicit comment and received the following response:

We appreciate the heads up, but I don’t know if I’ll be of much help.

It’s an odd, highly-regulated world that Dwolla has made the choice operate inside of. Where some scenarios appear black and white, rules and procedures can often add layers of grey. Of course, it’s on us to find new ways to balance convenience, safety, and privacy with these requirements and see through the grey, but it’s important to note that we’ll always err on the side of caution. We understand that being misunderstood by our own users sucks, but if it means protecting the network and the community, we’ll do it.

Well they were at least right on one point: They weren’t much help.

I appreciate that financial systems are complex and highly regulated and that Dwolla is often stuck between a rock and a hard place where certain kinds of transactions are concerned, but this isn’t one of those things. We’re not talking about suspending an account based on known wrongdoings or even suspicion with reasonable evidentiary support, we’re talking about removing someone’s access to their own funds without evidence, process or decency.

With this in mind, I urge those of you still using Dwolla to take great caution with your accounts, should you choose to continue. Apparently all it takes to get your account shut down these days is doing exactly what Dwolla claims to be all about – sending someone other than MtGox money.

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  • carbonpenguin

    Who would you say is to optimal service now, if Dwolla is starting to suck?

  • carbonpenguin

    Who would you say is to optimal service now, if Dwolla is starting to suck?

  • _bc

    Coinbase, but maybe one day someone will lean on them too.

    • Rock

      The difference is that Coinbase is entirely committed to serving bitcoin users. If they stop doing that, then they have no business.

  • _bc

    Coinbase, but maybe one day someone will lean on them too.

    • Rock

      The difference is that Coinbase is entirely committed to serving bitcoin users. If they stop doing that, then they have no business.

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  • Skaag Argonius

    I just signed up with them two days ago and this article convinced me it was a mistake. I know Josh for a few years now. A system has to be horribly broken to have blocked Josh's business.

    I don't care about "erring for safety" – that's complete bull. They can look into it and make a decision that does not harm their customer!

    In a decent society, if a business "confiscated" your funds, you could go to the police and file a complaint about theft of funds.

    I think a business that relies solely on gamification to stop fraud, as opposed to raising a flag for an investigator who then follows up, has a much deeper problem. Fortunately that problem now has a solution: Bitcoin. And the sooner the better.

  • Skaag Argonius

    I just signed up with them two days ago and this article convinced me it was a mistake. I know Josh for a few years now. A system has to be horribly broken to have blocked Josh's business.

    I don't care about "erring for safety" – that's complete bull. They can look into it and make a decision that does not harm their customer!

    In a decent society, if a business "confiscated" your funds, you could go to the police and file a complaint about theft of funds.

    I think a business that relies solely on gamification to stop fraud, as opposed to raising a flag for an investigator who then follows up, has a much deeper problem. Fortunately that problem now has a solution: Bitcoin. And the sooner the better.

  • http://twitter.com/ibutton77 @ibutton77

    @carbonpenguin: I recommend choosing an exchange besides MtGox for small volume USD transfers, or any business where you don't feel like being cavity searched, and if you do large volume where you feel only Gox can make the exchange, then get money in and out through Intl Wire.

  • http://twitter.com/ibutton77 @ibutton77

    @carbonpenguin: I recommend choosing an exchange besides MtGox for small volume USD transfers, or any business where you don't feel like being cavity searched, and if you do large volume where you feel only Gox can make the exchange, then get money in and out through Intl Wire.

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  • Timothy Bell

    I used to play occasional online poker and NLOP owes me about $27.50 which they sent to DWOLLA – now DWOLLA says to get my money I have to give them my SSN, Bank account numbers, etc. This is extortion, plain and simple. I don't want a DWOLLA account or relationship; I just want my money. Well they won't get my personal information but I am considering a class-action lawsuit for all of those accounts with money in them where law-abiding private citizens are refusing the extortion; this is theft, plain and simple. And I'll be including NLOP in this as they took my monthly fee but paid my money to a third party. NO MORE.

  • Timothy Bell

    I used to play occasional online poker and NLOP owes me about $27.50 which they sent to DWOLLA – now DWOLLA says to get my money I have to give them my SSN, Bank account numbers, etc. This is extortion, plain and simple. I don't want a DWOLLA account or relationship; I just want my money. Well they won't get my personal information but I am considering a class-action lawsuit for all of those accounts with money in them where law-abiding private citizens are refusing the extortion; this is theft, plain and simple. And I'll be including NLOP in this as they took my monthly fee but paid my money to a third party. NO MORE.