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Author Topic: TradeHill - Dwolla is being scammed and reversing transactions  (Read 17937 times)
makomk
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July 27, 2011, 11:28:40 PM
 #101

This might be a naive question - but since when are SEPA transfers reversable? (In case that you gave a correct and matching account name + account number.) I never heard nor have seen reversed SEPA transactions so far. Can you maybe elaborate on this?
They're not reversable if you, as the owner of the account being transferred from, gave a correct account number and name. They are reversable with certain restrictions if the original transfer request itself was made fraudulently, even after the funds have supposedly cleared. Mt Gox's problem was that phishers were carrying out fraudulent transfers from other people's accounts to Mt Gox.


Dwolla is aware of it. But if they can just reverse their payment, they have no incentive to do anything about it.
They can't do anything about it. Normally there'd either be a delivery of a product that's traceable or no way for someone to make large amounts of money from this and thus no incentive to do it, but due to the nature of Tradehill's business neither is true.

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July 28, 2011, 12:18:56 AM
 #102

They can't do anything about it. Normally there'd either be a delivery of a product that's traceable or no way for someone to make large amounts of money from this and thus no incentive to do it, but due to the nature of Tradehill's business neither is true.
How would it matter if there's a delivery of a product that's traceable? The claims in this case aren't that TradeHill didn't do what they said they were going to do, the claim is that the original transfer is unauthorized. The situation would be precisely the same if TradeHill had shipped them a physical product.

Suppose instead of buying bitcoins, TradeHill had shipped a physical product and TradeHill could prove that. How would that change things? TradeHill would still be out the product they had shipped and Dwolla would still have taken back the money.

Even if the physical product could be recovered, someone would still be out the costs of preparing, shipping, and restocking the product. There would still be the issue of whether Dwolla or TradeHill eats that loss. Dwolla can't afford to eat that loss on $0.25 per transaction. And TradeHill can't on .5% commissions. And there's always the chance the physical product couldn't be recovered.

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July 28, 2011, 05:36:02 AM
 #103

I agree with Mr JoelKatz: Why should tradehill have to have "tracable proof" of products and services? Why isn't a list of account transactions good enough? That is good enough for Dwolla obviously because all they provide is a list of transactions (one that apparently they can change over time whenever they want)

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July 28, 2011, 04:13:04 PM
 #104

Watching Bruce's show from yesterday covering Dwolla's emails.

Their "answers" to his direct questions are downright despicable, and even the irrelevant garbage they are saying is dishonest.

And their CEO thinks it's funny to mock Bitcoin investors? Who are making up almost his entire customer base.

They deserve the failure that's coming to them.

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July 28, 2011, 05:44:17 PM
 #105

Watching Bruce's show from yesterday covering Dwolla's emails.

Their "answers" to his direct questions are downright despicable, and even the irrelevant garbage they are saying is dishonest.

And their CEO thinks it's funny to mock Bitcoin investors? Who are making up almost his entire customer base.

They deserve the failure that's coming to them.

I couldn't figure out what was and wasn't written between Bruce's numerous interjections declaring what was obvious, pathetic, or dishonest. Just the facts sir!

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makomk
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July 29, 2011, 12:14:22 AM
 #106

Watching Bruce's show from yesterday covering Dwolla's emails.

Their "answers" to his direct questions are downright despicable, and even the irrelevant garbage they are saying is dishonest.
Compare Bruce's argument that all they'd have to do would be to publish an e-mail they'd sent to Tradehill informing them about the transaction reversals with (a) their initial statement that they can't release details about specific customers or transactions and (b) Bruce's second e-mail to them. (It's revealing that they haven't quoted any concrete policy of informing customers about reversed transactions but unsurprising that they won't publish private e-mails.)

And their CEO thinks it's funny to mock Bitcoin investors? Who are making up almost his entire customer base.
Finally managed to find the actual article Bruce was referring to - that was a bit of a pain.

Edit:
How would it matter if there's a delivery of a product that's traceable? The claims in this case aren't that TradeHill didn't do what they said they were going to do, the claim is that the original transfer is unauthorized. The situation would be precisely the same if TradeHill had shipped them a physical product.
It matters because Tradehill were offering a service that had the equivalent of a big neon sign on it reading "ideal for laundering stolen money". Of course, they should've reacted by refusing to do business with Bitcoin marketplaces from the start.

Even if the physical product could be recovered, someone would still be out the costs of preparing, shipping, and restocking the product. There would still be the issue of whether Dwolla or TradeHill eats that loss. Dwolla can't afford to eat that loss on $0.25 per transaction. And TradeHill can't on .5% commissions. And there's always the chance the physical product couldn't be recovered.
The riskier fraud is and the harder it is to make money on it, the less likely it is to happen.

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July 29, 2011, 01:14:27 AM
 #107

How would it matter if there's a delivery of a product that's traceable? The claims in this case aren't that TradeHill didn't do what they said they were going to do, the claim is that the original transfer is unauthorized. The situation would be precisely the same if TradeHill had shipped them a physical product.
It matters because Tradehill were offering a service that had the equivalent of a big neon sign on it reading "ideal for laundering stolen money". Of course, they should've reacted by refusing to do business with Bitcoin marketplaces from the start.
Excellent point. I don't think Dwolla could have refused to do business with Bitcoin marketplaces from the start. Part of their business model and sales pitch is that they don't care what you do so long as it's legal.

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ErgoOne
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July 29, 2011, 01:26:55 AM
 #108

I've been a bit hesitant (to put it mildly) to use TradeHill because I was slammed with a bunch of spam with TradeHill URLs right after the Mt. Gox breakin.  It looked at first as if Tradehill was trying to take advantage of Mt. Gox's problems.  I wasn't impressed with the plausible deniability because of their affiliate program.  Affiliate programs are how many companies spam while avoiding responsibility for spamming, and is how most actual spammers get paid for sending spam.  I'm one of the people that tries to clean up the virtual piles of manure that spammers spread around the Internet. Because of this, affiliate programs leave a *really* bad taste in my mouth.  Rightly or wrongly I attribute the attitudes of spammers to those who run affiliate programs.  :/  So my trust in Tradehill hasn't been great.

However, I'm impressed by how they are handling their current issues with Dwolla.  They are making clear, detailed allegations of fraud against Dwolla backed by names, numbers, charts, etc.  They're talking and acting like a company who has the facts on their side and is confident of prevailing in court should it come to that point, but that prefers not to go to court.  In other words, they're acting like people who are telling the truth.  I believe them.

Dwolla needs to answer these allegations, publicly and in the same forums where they have been made.
99Percent
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July 29, 2011, 01:50:44 AM
 #109

It does seem impressive, but it doesn't add up IMO.

TradeHill claims that there is a *huge* percentage loss of invalid transactions occurring which the likes of MtGox hasn't even bothered to check. Considering that MtGox has recently suffered a major setback I find that claim dubious, considering the tender freshness of bitcoin trading.. Tradehill claims losses are in the thousands of dollars range... why would *any* financial keep on business as usual while such quantities of money are being thrown around as potential losses?

I also find it suspect that in the other thread, TradeHill starts promoting Paxum.
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July 29, 2011, 01:56:44 AM
 #110

I don't find Tradehill's promotion of Paxum in the least suspicious under the circumstances.  Without Dwolla, they *must* have some means of processing payments/letting customers transfer money in and out of Tradehill accounts.  This appears to be the means that they currently have chosen.

That doesn't mean you or anybody should put huge amounts of money at risk through this channel.  But IMHO Bitcoin itself is too new/untried to risk any money that you can't afford to loose anyway.  So I'm going to give this a try and see what happens.
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July 29, 2011, 02:25:24 AM
 #111

It does seem impressive, but it doesn't add up IMO.

TradeHill claims that there is a *huge* percentage loss of invalid transactions occurring which the likes of MtGox hasn't even bothered to check. Considering that MtGox has recently suffered a major setback I find that claim dubious,

Do you?  I would not have been surprised if Mt Gox was pretty busy with other things, and their books got pretty scrambled in the fallout of their other recent issues anyway.

That Dwolla would be editing their books was kind of a shock to everybody and I don't think anybody would have expected it (and parenthetically, I have not heard *anybody* come up with a defense for this except for CampBX who seemed to be of the opinion that they may have a possible, if distasteful, 'out' from a legal perspective.)

Indeed it seems like Mt Gox and has gone through a 'no-problem -> maybe small problem ->stop using Dwolla' range of responses after being tipped off.  That tells me that they had probably something less than a full situational awareness.


 considering the tender freshness of bitcoin trading.. Tradehill claims losses are in the thousands of dollars range... why would *any* financial keep on business as usual while such quantities of money are being thrown around as potential losses?

I also find it suspect that in the other thread, TradeHill starts promoting Paxum.

You do?  Tradehill mentioned that they are hard at work finding a replacement for Dwolla which, as others seem to be finding, is not currently usable (and many others postulate never will be.)

The main thing which surprised me was how quickly they found a company in this business, and one who claims to have found a solution for the charge-back issue.  I'm dubious of that claim but would be delighted to see them prove me wrong.(*)  Also the outfit claims to have been setting up for three years before they went into action.  That's plausible I suppose, and I can understand it in some scenarios, but it also is something I would investigate.

* Actually, I personally don't care all that much.  Wire transfers are working well for me in my situation.  OTOH, I might someday want to use the service for things other than funding my BTC trading.

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July 29, 2011, 03:01:01 AM
 #112

Great, that's just great.  Just what we need another scandal caused by incompetence. 
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July 29, 2011, 05:18:47 AM
 #113

And their CEO thinks it's funny to mock Bitcoin investors? Who are making up almost his entire customer base.
Finally managed to find the actual article Bruce was referring to - that was a bit of a pain.

Wow.  That article is amazing.  He seems to think that the problem is fraudulent bitcoin transactions being converted to dollars, when the real issue, as far as I can tell, is fraudulent bank transactions being converted to bitcoins.

A quick quote to illustrate what I'm talking about.

Quote from: douchebag
Someone obviously figured out how to game it.

That poses a lot of questions I don’t have answers for. If someone steals the bananas you buy at the store. What do you do?

Let me rewrite that in a way that reflects reality:

Quote from: me
Someone obviously figured out how to game Dwolla.

That poses a lot of questions I should have answers for, but don't.  If someone steals from Dwolla and then launders the gains through an irreversible system, what does Dwolla do?

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July 29, 2011, 01:26:32 PM
 #114

How is Paxum different from Dwolla? I read the terms and FAQ (also thought Dwolla looked fine last week) but aren't they suseptable to teh same attack? TradeHill can hope Paxum doesn't push their losses upon the merchant, but otherwise, what's the difference?

For the record, I pushed Dwolla funds to Mt. Gox this morning with no trouble.

Quote from: douchebag
Someone obviously figured out how to game it.

That poses a lot of questions I don’t have answers for. If someone steals the bananas you buy at the store. What do you do?
Quote from: me
Someone obviously figured out how to game Dwolla.

That poses a lot of questions I should have answers for, but don't.  If someone steals from Dwolla and then launders the gains through an irreversible system, what does Dwolla do?

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July 29, 2011, 02:28:21 PM
 #115

How is Paxum different from Dwolla? I read the terms and FAQ (also thought Dwolla looked fine last week) but aren't they suseptable to teh same attack? TradeHill can hope Paxum doesn't push their losses upon the merchant, but otherwise, what's the difference?

For the record, I pushed Dwolla funds to Mt. Gox this morning with no trouble.

Quote from: douchebag
Someone obviously figured out how to game it.

That poses a lot of questions I don’t have answers for. If someone steals the bananas you buy at the store. What do you do?
Quote from: me
Someone obviously figured out how to game Dwolla.

That poses a lot of questions I should have answers for, but don't.  If someone steals from Dwolla and then launders the gains through an irreversible system, what does Dwolla do?

A rep from Paxum is here on the forums.  He says they have rigorous verification processes that make fraud very unlikely.  So, they don't have losses that they need to pawn off on their customers.

Dwolla was pretty much just on the honor system, apparently.  Which is odd.  I got a phone call from Dwolla when I set up my account, just to verify my info.  I still haven't added any banking info to my dwolla account.

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July 29, 2011, 09:21:52 PM
 #116

A rep from Paxum is here on the forums.  He says they have rigorous verification processes that make fraud very unlikely.  So, they don't have losses that they need to pawn off on their customers.

Dwolla was pretty much just on the honor system, apparently.  Which is odd.  I got a phone call from Dwolla when I set up my account, just to verify my info.  I still haven't added any banking info to my dwolla account.

I didn't see under what conditions Paxum can reverse charges. They should mention that. Mr. Paxum are you listening?

Certainly if someone compromises the bank or Paxum account, I suspect Paxum will block, maybe reverse transactions. While perhaps unlike, what are the circumstances and procedures?

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July 29, 2011, 09:47:37 PM
 #117

I didn't see under what conditions Paxum can reverse charges. They should mention that. Mr. Paxum are you listening?
Yes, that would be good to know.

Certainly if someone compromises the bank or Paxum account, I suspect Paxum will block, maybe reverse transactions. While perhaps unlike, what are the circumstances and procedures?
I sure hope not. The next time MtGox publishes their password database, and some hacker finds my Paxum password is the same, Paxum has no need to reverse any transactions. I screwed up and it's my fault, not theirs. And yes, I'm speaking from experience. I did lose quite a bit of money due to the previous MtGox database.

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July 29, 2011, 09:57:36 PM
 #118

A rep from Paxum is here on the forums.  He says they have rigorous verification processes that make fraud very unlikely.

Hopefully their process goes through more verification than the rep's posts have. A professional banking establishment representative whose grammar and spelling is that off the mark should be sending red flags to most.

I used to day trade Bitcoin successfully. Then I took an arrow to the knee.
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August 01, 2011, 11:47:51 PM
 #119

When will people stop being surprised when people get Goxed?  Nice guy, but what is needed is a business professional and some programming professionals.  Professional doesn't just mean the most technical debugging skill - it means doing it correctly and not on live databases, or taking out peoples money for weeks on end, or .. or .. or ..

If you guys want BTC to become a successful currency, you have to start acting like it's really money, whether you are the giver or receiver of funds, as an individual or a business.

I see too many entitled people whining about what they've lost, gotten stolen, can't access their basket full of eggs in one basket, etc.

Use your brains.  Diversify.  Spread out the risk.

Be fearful when others are greedy, and greedy when others are fearful.

-Warren Buffett
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August 02, 2011, 03:48:16 AM
 #120

Tradehill, you're blaming the wrong person, it's not Dwolla's fault that users are initiating chargebacks with their banks. Dwolla's only choice is to reverse the transaction on their end.

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