Hey all. Just wanted to pass along my experience with Paypal. Let me start by saying that I made the mistake of not using escrow on my bitcoins. So, in the end, it is my own fault for getting scammed. Irrespective, I still think it is worthwhile to pass this along because even though I made that mistake, I thought others could learn from my Paypal experiences.
First, I bought bitcoins on localbitcoin.com. Somehow, the seller gamed the system and found a way to list his address within 10 miles of me -- when he was actually in the Ukraine. Localbitcoin could not explain that, but I have not fought with them about that. (Also, do not rely on their feedback system - it is still a work in process and can be easily gamed).
Second, I made the mistake of not requiring escrow. I did not see the warning message on localbitcoins (there is one). I have pointed that out to localbitcoins. Obviously, not their fault - mine. But something just to note as it can be missed. Just an FYI, if you do an online transaction with anyone -- you need to use escrow. And, the escrow agent has to be legitimate. No exceptions.
Third, once I paid for the coins, the seller stopped communicating. Simple enough, I thought, I would just reverse the transaction. Not so simple it turns out.
Fourth, I went to Paypal and disputed the charge. Lucky for me, the seller actually claimed he would mail coins to me, i.e., physical bitcoin Caucasus. (Normally, localbitcoins is just bitcoins, not physical ones. But the physical part was how the seller gamed me into not thinking I needed escrow, i.e., relying on Paypal's dispute policy). So, as a result, I figured that I was covered by the "tangible goods" refund policy of Paypal. Well, it wouldn't be so simple.
After disputing the charge and stating that I had purchased coins that weren't being delivered. There was nothing in my complaint that suggested or implied that I had purchased intangible goods. The seller
never responded. No email response - no documents. No nothing. So, my statements stood uncontroverted. As a result, I should win right? Wrong.
Instead, Paypal unilaterally decided I had purchased "intangible goods." They claimed that the seller had called them and told them that. Further, they claimed the seller had told them I had purchased the coins on blockchain.info. That seemed to be the giveaway to me that Paypal was lying, particularly since the case notes contained no information about any calls or other communication from the seller. And, during my numerous calls with them, they made a number of statements that made it obvious that they were lying.
What amazed me was that I kept coming back to the same issue over and over. Ok, so I say I bought tangible goods, and he says I bought intangible goods, did he provide you proof that he had sent me the items? They changed the topic every time I asked the question. I kept repeating to them - I paid, I wasn't shipped my item. Period. The seller had no proof that anything had been shipped.
What I started to conclude from the conversations was that they made the conclusion that I had purchased "intangible goods" from the seller based upon the sellers'
other selling activity. They made several statements about bitcoin - and seemed to somehow know that the seller was selling bitcoins generally. And, what made no sense was why they would claim the seller referred them to blockchain? The seller sold them through localbitcoins. Why not refer them to that site? It made no sense.
In any event, after I lost the initial round of dispute (because of an alleged phone call from the Ukraine claiming that intangible goods had been sold), I then opened an appeal and had to send various emails to Paypal documenting the transaction. After providing them emails showing that I was to receive physical coins, Paypal ultimately told me that I had won the dispute -- but they were unable to recover any funds. Which brings me to my final points.
Paypal's process took so long - in terms of filing a complaint, escalating it, appealing etc., that the seller was long gone by the time the transaction concluded.
So here are some conclusions I have reached about Paypal:
1. Although Paypal advertises for people to sell intangible goods and virtual goods through Paypal (
https://www.paypal.com/us/webapps/mpp/digital-goods) - there is a NO PROTECTION policy for the purchase of such goods.
2. Paypal profits from the sale of virtual items, but you are SOL if you actually buy virtual goods and then are scammed. So, paypal profits and has no downside from the sale.
3. Do not buy bitcoins-- physical or otherwise through Paypal. They are being anti-bitcoin. It makes sense, since Bitcoin should eliminate the need for a middle man that charges excessive fees, i.e., Paypal.
4. Paypal's complaint process is fundamentally flawed. Do not rely on it, ever, to get your money back. Scammers have studied their policies and know specifically how to game them.
5. After the fact, Paypal sent me an email on how to avoid fraud. The email sent me information that does not even match up with their own website (i.e. how to check a seller's feedback, etc.).
Finally, Paypal told me that they would provide me back funds if they recover them. I don't believe them. I think it is just more lies. In fact, the scammer is still allowed to receive payments on paypal and is still a "verified" member. If they wanted to get my money back, they would confiscate any funds that went to the seller to repay his victims.
So, I am going to ping the seller's account by sending some small payments to him. Let's see if Paypal is telling the truth. If they are telling the truth, in theory, they should confiscate those payments and provide them back to me.
I will post again on this last point with an update about what they do or do not do.
