More crap to deal with - Dwolla Reverses TradeHill Transactions

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Dwolla suspended my account that had over $400 in it and now my money is gone.

Fuck, I can't believe that. I've always been suspicious of Tradehill and I guess I was right. Mt. Gox all the way or any other alternative.

What does this have to do with MtGox or TradeHill?

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[RandyFolds]

Dwolla suspended my account that had over $400 in it and now my money is gone.

Fuck, I can't believe that. I've always been suspicious of Tradehill and I guess I was right. Mt. Gox all the way or any other alternative.

To paraphrase the two posts above me, are you retarded? Mt. Gox all the way?

[MilkMan]

Dwolla suspended my account that had over $400 in it and now my money is gone.

Fuck, I can't believe that. I've always been suspicious of Tradehill and I guess I was right. Mt. Gox all the way or any other alternative.

Do you read for content? What did Tradehill do wrong?

It's my belief Dwolla was suspecting Tradehill of making illegal, fraudulent transactions, or potentially laundrying money, but it could be a number of things. To protect Dwolla's ass, they had to return or hold any transactions that were received from tradehill. Now this is my guess, not fact. Be careful who you give your money too.

[Smalleyster]

Dwolla suspended my account that had over $400 in it and now my money is gone.

Fuck, I can't believe that. I've always been suspicious of Tradehill and I guess I was right. Mt. Gox all the way or any other alternative.

Do you read for content? What did Tradehill do wrong?

It's my belief Dwolla was suspecting Tradehill of making illegal, fraudulent transactions, or potentially laundrying money, but it could be a number of things.

Upon what evidence do you base this belief?

[CubedRoot]

Here is the reply I received from Dwolla today about this "scandal".
It appears there have always been chargebacks available for ACH transfers, but there are no chargebacks if a Merchant uses their POS service to receive credit card payments.

Lynn
Please type your reply at the top of the email...
Dwolla Support
JUL 27, 2011  |  07:13PM CDT
Lynn,

Thank you for your e-mail.

There are no credit card or debit card chargebacks. Our apologies for any miscommunication.

There have always been bank returns and disputes in the Dwolla system. The dispute form and process has been a part of Dwolla since our initial release.

In the meantime we are putting together more information for the web site to ensure merchants are clear on the process that will likely involve updating documentation as well.

Please let us know if we can expand on any particular scenarios you have questions about. We will be happy to assist you. If there is any situation that involves your financial institution please let us know and we will be happy to dive into it!
Lynn
JUL 26, 2011  |  06:29PM CDT
Original message
Hello,
I was a true Dwolla fan until the recent scandal you guys have pulled with Tradehill.com.
You mention there were no worries of chargebacks on this page:
http://www.dwolla.org/blog/retail-merchants-rejoice-web-kiosk-online/
But, on your Help page, you clearly state that you do indeed do chargebacks. Here is that page for reference:
http://help.dwolla.com/customer/portal/articles/99247-why-was-my-transaction-reversed-

Please, can you address this publicly? I was honestly pulling for Dwolla to become the preferred way to pay for transactions on the web, and eventually become competitive with PayPal, but after this recent scandal, I am very disappointed, and I am afraid I no longer find your services valuable.
For your reference this is Case #: 2077
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[MilkMan]

Oh God, it was Dwolla's bad.... Still I'd only use http://mtgox.com or http://bitcoinbux.com. Any other site is a gamble in my opinion. Just my 2 cents

[RandyFolds]

Oh Good, that makes more sense. Still I'd only use http://Http://mtgox.com or http://Http://bitcoinbux.com. Any other site is a gamble in my opinion. Just my 2 cents

What makes more sense? That email just proves that dwolla is being sketchy about this whole thing. You, sir, are very misinformed. Try reading the thread. It usually tells you what's going on.

I can't say from experience, but I am pretty certain that both those exchanges use dwolla as well, and as the issue is with dwolla and NOT the exchanges, they are in the same boat as TH.

[Smalleyster]

Oh Good, that makes more sense. Still I'd only use http://Http://mtgox.com or http://Http://bitcoinbux.com. Any other site is a gamble in my opinion. Just my 2 cents

You sir have just proven that you do not comprehend that which you read, nor do you seem to have the ability to defend your "opinion".

[WiseOldOwl]

~I posted this in another thread before I found this one.~

My exchange's volume is small potatoes compared to TH and MtGox,
But I stand by our industry, and have removed Dwolla as a payment option for our exchange to protect myself, and add to the "punishment" of dwolla.
They absolutely must clear up any issues with their 2nd biggest customer, to think any company would do anything but is ludicrous.
Thank you Jered and the TradeHill team for bringing this to our attention, maybe we all (Exchange Heads) do need to stay in touch for when a potentially threatening situation is discovered.

I did speak with dwolla when opening my exchange, and their exact words were that transactions between dwolla accounts in regards to virtual currencies were irreversible and couldn't be charged-back, not that there wasnt any chargebacks or disputes. That being said it is very obvious that TradeHill is in the business of virtual currencies. If this was their Policy, then they knew they ran the risk of this happening and basically said they would cover it.
Dwolla, don't alienate your whole customer base. MtGox I'm sure will turn around and leave if they are going to risk losing 10's of thousands of dollars too. Not to mention all us 2nd tier exchanges, and bitcoin users in general.


Thanks again for the Due-Diligence, It is disturbing that a financial company either doesn't understand their own policy, or worse just plain lies about it.
The race is on to figure out a great payment solution again,
For now, MoneyGrams and Western Unions, are King when it comes to safety and that would be an unbelievable pain in the A** for a company like tradehill or mtgox I really hope we can find you guys a perfect solution ( If I figure one out I will share it of course). Good Luck in your ventures!

Also, on a completely separate note, MilkMan, you have a situation that needs to be handled with one of my customers. I have sent you an email regarding it, please handle this asap and let me know. Thank You, you can PM me if you need too but dont clutter this thread with an answer to this.

[GeniuSxBoY]

^lol, dumbass.


Even if you lose 2.5% by sticking with dwolla, your decision makes you lose 100%. You just lost my potential consumerism to your site for being that dumb.


We're talking about Tradehill having $1,880,000 in transactions and losing $47,000. That's less money than i'd spend on credit card fees for accepting credit cards.

[WiseOldOwl]

I didn't say I wouldn't use them at all, I said as a payment option...Genius
Payout is still functional.
 

[GeniuSxBoY]

:facepalm:

[WiseOldOwl]

Also,
That 2.5 % is about to skyrocket now that we have fully explained the weakness in their system to everyone.

[MilkMan]

Wow I'm an Idiot. Disregard what I previously posted. I am still in disbelief that Dwolla allowed this incident to occur. And to do it to they're best customers (Tradehill patrons). I apologize for the misunderstanding, It shocked me at first, but I will be sure to be diligent in my research and make sure my posts are as accurate as possible. And Mr. Owl, I'm taking care of that request.

[WiseOldOwl]

^lol, dumbass.


Even if you lose 2.5% by sticking with dwolla, your decision makes you lose 100%. You just lost my potential consumerism to your site for being that dumb.


We're talking about Tradehill having $1,880,000 in transactions and losing $47,000. That's less money than i'd spend on credit card fees for accepting credit cards.

I also want to point out that TH only takes a small percentage (<2.5%) of each transaction. Although it does not directly correlate with the amount in dwolla transfers, a number like 47,000 is 4.7% off 1,000,000 in transactions. I dont know what they charge but lets say .5% for the sake of argument.
47,000 = 9,400,000 in transactions
Or in other words if they charge .5% they would have to process 9.4 million to make $47,000 in profit.
That really sucks to lose no matter what.

If you choose to process credit cards then that is your decision and Im sure losing the fee was part of your business plan, If it isn't part of your plan then 2.5% could potentially be all the profit or more.

[grod]

Also,
That 2.5 % is about to skyrocket now that we have fully explained the weakness in their system to everyone.

This, this and more this.  We've got a middleman more than willing to stick their big customers with the costs of fraud after convincing them otherwise.

Really, what Dwolla is doing is no less fraudulent than the guys running the scams.  Dwolla scammed TH out of $47000 at the moment.  Any business, big or small, would have communicated with their customer about a loss that big by now.  I work for a fortune 500 company and any customer with a $47000 dollar dispute would have been escalated to VP level by now.

The sad fact is: Dwolla can't cover fraud with their business model.  They're keeping silent and hoping this all blows over and uninformed people keep using them.

I, for one, am extremely glad TH brought this public.  If they're willing to burn a big account's butt like this what's to say they simply won't pack up and take the small fry funds next?  Definitely not a trustworthy outfit in the least -- they SILENTLY reversed transactions hoping TH wouldn't notice.  That right there speaks volumes.

MtGox is playing with fire accepting Dwolla deposits.  Sure, they can cover some fraud, but what happens when it goes from 2.5% to 10%?  20%?

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Not to mention that the way Dwolla did this seems to completely violate generally accepted accounting principles. Dwolla is in some deep shit even if they DO give TradeHill's money back.

[dacoinminster]

[POLL] Will you reverse your Dwolla transactions?
http://forum.bitcoin.org/index.php?topic=32354.0

If the results of this poll are accurate, there are more reversals coming. If I were running an exchange, I would disconnect my bank account from Dwolla ASAP, changing banks if necessary. Let Dwolla sleep in the bed they made.

[makomk]

The problem is bitcoin is a hard currency, and any attempts to hook it up to the soft currency system (a.k.a. banks where almost everything can be charged back) means that there are going to be gaps created that people will take advantage.

This is an issue/problem with the current banking system, a lot of the fraud that happens today is only possible because of the current broken banking system.

There's actually no reason the banks couldn't create a system where transactions really are irreversable. The trouble is that no-one would want to use it: either they'd have to require all transactions to be made at branches after presenting proof of ID and paying a fee to cover the associated costs, or customers would have to accept that their account could be emptied out by crooks at any time for reasons beyond their control. There's no way they could swallow the cost of fraud otherwise.

It turns out that it's cheaper for everyone involved if they skip the really expensive security measures and just include a way to reverse transactions.

[coblee]

The problem is bitcoin is a hard currency, and any attempts to hook it up to the soft currency system (a.k.a. banks where almost everything can be charged back) means that there are going to be gaps created that people will take advantage.

This is an issue/problem with the current banking system, a lot of the fraud that happens today is only possible because of the current broken banking system.

There's actually no reason the banks couldn't create a system where transactions really are irreversable. The trouble is that no-one would want to use it: either they'd have to require all transactions to be made at branches after presenting proof of ID and paying a fee to cover the associated costs, or customers would have to accept that their account could be emptied out by crooks at any time for reasons beyond their control. There's no way they could swallow the cost of fraud otherwise.

It turns out that it's cheaper for everyone involved if they skip the really expensive security measures and just include a way to reverse transactions.

Ironically, that's exactly what bitcoins is trying to solve. Transferring bitcoins is non-reversible. But then that also means if someone breaks into your wallet and steals your coins, you are screwed. I'm not sure if there will ever be a solution that can satisfy both needs at the same time.