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Author Topic: CoinPal beta - Buying bitcoins with PayPal  (Read 100477 times)
mndrix
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April 30, 2011, 10:25:16 PM
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ETA on when the site will be back up?

Funny that you should ask.  PayPal just froze my accounts.  I'll post more details shortly.
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April 30, 2011, 10:33:20 PM
 #202

ETA on when the site will be back up?

Funny that you should ask.  PayPal just froze my accounts.  I'll post more details shortly.

That's not good, I hope it comes back up soon Sad.  I've enjoyed using your service as a fast way to cash out my BitCoins to pay for new hardware.

mndrix
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April 30, 2011, 10:49:18 PM
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PayPal has frozen my account so CoinPal won't continue as we know it.  My funds (only about $5k) are tied up there for the next 180 days.  Read the huge wall of text below for all the details Smiley

History and details about the freeze

When I started coding CoinPal back in December 2010, I emailed compliance@paypal.com asking for permission to sell Bitcoins using PayPal.  I also emailed aupviolations@paypal.com seeking clarification on whether selling Bitcoins met their definition of "currency exchange".  After about two weeks, I received no response to either email. I decided to start operating the site, thinking they wanted to see something working before spending time on a response.

After operating for two months, PayPal's anti-fraud department called me to discuss some earlier chargebacks.  We spoke for 20 minutes and PayPal told me it was fine to sell Bitcoins as long as I kept chargebacks low.  Two months after that, PayPal placed a 5% reserve on my account.  I spoke with the high-risk goods department on the phone a few days later.  They were fine with me continuing business as long as I had a reserve on the account to cover any chargebacks that might arise.

Today PayPal called to say they were freezing my account because they consider Bitcoins an "ecurrency".  I told them that they had given me permission on two separate occasions to sell Bitcoins.  They responded, "that department isn't authorized to make those decisions."  The official statement in my account says "This limitation cannot be appealed."

During the entire time I operated CoinPal, my fraud rate was 1.5%  That includes the first wave of fraud when I was still learning how the scammers operated.  If that first weekend is excluded, my fraud rate was 0.9%  I obviously honored my end of the arrangement.

CoinPal was a success

During the four months that CoinPal operated, it helped introduce Bitcoin to 1,484 people by distributing 60,858 BTC (not counting MoneyPak trades).  It also helped 76 people bootstrap their OTC ratings.

My personal view is that PayPal freezing my account is a coming of age for Bitcoin.  Previous PayPal account freezes in the Bitcoin community were related to chargeback volume.  That was obviously not the problem here.  Someone inside PayPal specifically decided that Bitcoin was a big enough risk that it should be prohibited.  I see no greater compliment to a Hydra than cutting off one of her heads Smiley

CoinPal's future

I'm not entirely sure what CoinPal's future will be.  I have a nice long train ride from Denver to San Francisco next week (on my way to Google IO) which should give me plenty of time to consider.

I've thought of selling Bitcoins for Dwolla, but it sounds like Mt Gox has that under control.  I'd consider selling/donating the CoinPal source code but PayPal will certainly shutdown any official sucessor now that they've decided that Bitcoins are "ecurrency".  The fraud detection code is probably the most valuable component.  Perhaps I can leverage that in some way to help Bitcoin succeed.  I can't open source the anti-fraud code since most anti-fraud measures are "security through obscurity".  Of course, I'm open to any suggestions on CoinPal's future.

CoinCard will be easier to bring back, minus PayPal payments.  It only needs a debit card number to operate.  A possible PayPal freeze was one reason I focused on "gift cards" rather than PayPal exclusively.

This whole situation has reminded me once again why distributed, resilient systems like Bitcoin and OTC are so important.
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April 30, 2011, 10:55:53 PM
 #204

That sucks. Good luck with your future endeavors and all the shiny new toys they'll give you at Google IO.

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April 30, 2011, 10:59:00 PM
 #205

Damn PayPal! Sad
Now how im going to get my money i dont know. I sadly need paypal for now.

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April 30, 2011, 10:59:19 PM
 #206

Well damn, really sorry to hear that.  Thanks again for your hard work.  
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April 30, 2011, 11:00:45 PM
 #207

What a bunch of cunts!

What if this community decided to put their paypal accounts where their mouth is and gave you their own account to operate coinpal with. Is it even feasible? If so, how many frozen paypal accounts do you think it would take for them to reverse the policy?
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April 30, 2011, 11:06:16 PM
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I also heard from Bitcoin Morpheus that PayPal has shut him down from receiving PayPal Payments.  He is tied up on another unrelated project this weekend and won't have much time to get back to people about this until Sunday night or Monday, but he'll provide an update on his service then.

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April 30, 2011, 11:11:27 PM
 #209

Anyone know an easy, still alive, service like this one to change bitcoins for paypal?
Im afraid of getting stuck now with my bitcoins, since the only way for me to get money at this time is this PayPal crap =/

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April 30, 2011, 11:12:29 PM
 #210

Ah darn. What frustrating news! I definitely really liked this service.

Anyway, please check your coincard email, mndrix. I sent you 50 BTC for an order I made right before your site went down for maintenance. I now see why I haven't received the paypal funds.
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April 30, 2011, 11:21:59 PM
 #211

Anyone know an easy, still alive, service like this one to change bitcoins for paypal?
Im afraid of getting stuck now with my bitcoins, since the only way for me to get money at this time is this PayPal crap =/

At this point, I'm guessing your best bet would be Bitcoin-OTC, which can be relatively low-key and fly under Paypal's radar.
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April 30, 2011, 11:30:32 PM
 #212

How about AlertPay?
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April 30, 2011, 11:35:42 PM
 #213

I don't know if this is possible, but could you replace the Paypal client with one that transfers to major Credit/Debit cards instead? There would be more trust involved here, but I know that wouldn't shy me away.
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April 30, 2011, 11:41:33 PM
 #214

How about AlertPay?

Actually this might be a great idea. Also I think there's also some services that change alertpay money for paypal

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April 30, 2011, 11:43:26 PM
 #215

Maybe you could try a payment processor like Plimus or 2Checkout as a "middleman" between you and Paypal?

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April 30, 2011, 11:46:23 PM
 #216

Transferring to eWallets like Neteller would be good as well, but I haven't looked on their terms to see if they accept this kind of transfers.

For foreign users, it would be great to withdraw the funds at the ATM using Neteller's prepaid Master Card.
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April 30, 2011, 11:51:27 PM
 #217

I don't know if this is possible, but could you replace the Paypal client with one that transfers to major Credit/Debit cards instead? There would be more trust involved here, but I know that wouldn't shy me away.

For a while, Bitcoin Gateway exchanged Bitcoins for debit/credit card funds, and that's actually how I got my first coins.  The problem is that credit cards (and debit to a lesser extent) also have the same chargeback/fraud issues that PayPal has.  The only reason Bitcoin Gateway was able to work is because the guy manually called up the bank to make sure it was actually your card, and then called you personally to confirm the order, using the phone number on file with the bank.  It was a lot of manual labor and because of that, it couldn't scale to the size that CoinPal/CoinCard reached.
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May 01, 2011, 12:01:22 AM
 #218

I don't know if this is possible, but could you replace the Paypal client with one that transfers to major Credit/Debit cards instead? There would be more trust involved here, but I know that wouldn't shy me away.

For a while, Bitcoin Gateway exchanged Bitcoins for debit/credit card funds, and that's actually how I got my first coins.  The problem is that credit cards (and debit to a lesser extent) also have the same chargeback/fraud issues that PayPal has.  The only reason Bitcoin Gateway was able to work is because the guy manually called up the bank to make sure it was actually your card, and then called you personally to confirm the order, using the phone number on file with the bank.  It was a lot of manual labor and because of that, it couldn't scale to the size that CoinPal/CoinCard reached.

I see. I do love how CoinCard is just a simple click of the mouse.
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May 01, 2011, 12:19:02 AM
 #219

Wow this is really unfortunate. I just used coin card this morning and thought it was a great service and was easy to use.

Smiley  : 1LbvSEJwtQZKLSQQVYxQJes8YneQk2yhE3
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May 01, 2011, 12:21:17 AM
 #220

No way with such a low fraud rate that PayPal just suddenly decided to cut you off. I'll bet good bitcoins that somebody (i.e. the admins at overclock.net) tipped them off.

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