TradeHill - Dwolla is being scammed and reversing transactions

[Jered Kenna (TradeHill)]

Please see our blog post here: http://tradehillblog.com/2011/07/25/tradehill-audit-discovers-dwolla-transactions-are-reversible/ for a walkthrough of the transaction.

We would like to work with Dwolla and find a way to prevent this in the future. Hopefully the same thing hasn't happened on other exchanges.
Dwolla has been scammed out of at least $37,000 by our records and we have prevented another $27,000.

The latest updates can be found on www.tradehillblog.com


The individual listed is a confirmed scammer and most likely not their real name.
We have 17 other documented examples.

To sum it up: Dwolla sends out CSV files and emails stating that a payment has been credited. Several days later they remove the funds without mentioning anything to the merchant (TradeHill in this case).
We will continue to provide withdrawals through Dwolla and our users will be able to access all of their funds within TradeHill.



Jered

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[Smalleyster]

Any response from Dwolla yet?

[Jered Kenna (TradeHill)]

Any response from Dwolla yet?

None. We're looking forward to working with them and resolving this issue.
The idea of Dwolla is great but if transactions are reversible that changes things.
If they're not reversible then they shouldn't be advertised as so on their site here (bottom): http://www.dwolla.org/blog/retail-merchants-rejoice-web-kiosk-online/

Jered

[JoelKatz]

What information has Dwolla provided you about this transaction? Specifically, what information about whoever claimed that it was fraudulent and what explanation they gave? IMO, you are entitled to a signed affidavit and a police report at the very least.

[Jered Kenna (TradeHill)]

What information has Dwolla provided you about this transaction? Specifically, what information about whoever claimed that it was fraudulent and what explanation they gave? IMO, you are entitled to a signed affidavit and a police report at the very least.

Essentially none. We were told that it wouldn't go from "credited" to not credited and to download a new CSV. They told us that the user had their account suspended and that was the end of it.
They did confirm that the funds were not actually sent (despite being credited). We were unable to get any more information.

Jered

[JoelKatz]

Essentially none. We were told that it wouldn't go from "credited" to not credited and to download a new CSV. They told us that the user had their account suspended and that was the end of it.
They did confirm that the funds were not actually sent (despite being credited). We were unable to get any more information.

I hope Dwolla promptly acknowledges and corrects their mistake. Otherwise, their reputation is going to go to near-zero pretty quickly. They should reimburse you for whatever the actual amount of your loss was.

"Remember, these are cash-based transactions! No credit card fees, chargeback concerns, or signing necessary!" - Dwolla

[Smalleyster]

Their reputation is currently 0 with me unless and until this gets resolved.

[The_JMiner]

Wow good thing I have not recommended Dwolla yet, I was raving about it with a few people but now F*ck that.

[jwzguy]

Hello - first of all, this is horrible news, and I hope it is resolved very soon. We're behind you 100%.

I am still unclear on 2 issues you mentioned.
1) Does Dwolla owe you guys any money? Have you lost any funds after reversals?
2) You said your blog post was going to walk us through how this happened, but I only see that it did happen, not how they/you were scammed. First the funds in the transaction you got were confirmed and then they were reversed. Do you know how the scammer got his transfer confirmed in the first place?

Best wishes.

[TeraPool]

So how and why did this happen to tradehill and not mtgox?

Surely the "scammer" would attempt to defraud the largest, already-proven-to-be-incompetent exchange, no?

[JoelKatz]

So how and why did this happen to tradehill and not mtgox?

Surely the "scammer" would attempt to defraud the largest, already-proven-to-be-incompetent exchange, no?

It's possible Mt. Gox had the same thing happen and didn't notice. As I understand what they're saying, Dwolla just changed the status back to unpaid and took the money without any notification. If you weren't looking for something like that, you might not notice until some time later when you tried to balance the books.

[Jered Kenna (TradeHill)]

Hello - first of all, this is horrible news, and I hope it is resolved very soon. We're behind you 100%.

I am still unclear on 2 issues you mentioned.
1) Does Dwolla owe you guys any money? Have you lost any funds after reversals?
2) You said your blog post was going to walk us through how this happened, but I only see that it did happen, not how they/you were scammed. First the funds in the transaction you got were confirmed and then they were reversed. Do you know how the scammer got his transfer confirmed in the first place?

Best wishes.

1) $37,000  lost roughly, we caught another $27,000 and prevented it from leaving.
2) I should clarify that, when Dwolla credited the account the user bought BTC and moved it out.

Thank you for your support! Hopefully Dwolla will do the right thing and reimburse this.

So how and why did this happen to tradehill and not mtgox?

Surely the "scammer" would attempt to defraud the largest, already-proven-to-be-incompetent exchange, no?

It's impossible to guess why they would attack TradeHill and not Mt Gox.  I see no reason they wouldn't try. I hope they haven't. It's possible that they stopped after we caught them and this is the end of it.
We're going to have to wait and see what comes of this. It's going to be very interesting to say the least.

Jered

[tvbcof]

So how and why did this happen to tradehill and not mtgox?

Has Mt. Gox reported in to this forum on this subject (as have some of the other exchanges) and I missed it?  I am quite interested in their experiences here.  One would anticipate that being a larger exchange with no obvious means of discouraging scammers beyond the rest, they would have been vexed by the same issues.

[Jered Kenna (TradeHill)]

So how and why did this happen to tradehill and not mtgox?

Has Mt. Gox reported in to this forum on this subject (as have some of the other exchanges) and I missed it?  I am quite interested in their experiences here.  One would anticipate that being a larger exchange with no obvious means of discouraging scammers beyond the rest, they would have been vexed by the same issues.

He's spoken on IRC and said publicly that they haven't experienced any loses. We've spoken some in private and I won't quote anything else. I'll allow him to speak for himself and see where we go from here.

Jered

[bitcon]

first GOXED, now DWOLLA'D.

[newMeat1]

That sucks that Tradehill got hit with this. Dwolla should be very motivated to set it straight, or I won't be using their service again.

[tonygal]

2) I should clarify that, when Dwolla credited the account the user bought BTC and moved it out.

Jered

Jered - quick question.  How exactly did Dwolla take this money back from you?  Did they take it from your account balance with Dwolla?  And how long after the transfer IN was it taken back OUT?

[sequence]

Quite frankly Dwolla needs to hire more competent people!

[Jered Kenna (TradeHill)]

2) I should clarify that, when Dwolla credited the account the user bought BTC and moved it out.

Jered

Jered - quick question.  How exactly did Dwolla take this money back from you?  Did they take it from your account balance with Dwolla?  And how long after the transfer IN was it taken back OUT?

The transfers simply changed from credited to pending and the funds were removed from our account. They were most likely taken out after 3 or 4 days.  There were 17 instances and they varied.


Jered

[interfect]

Maybe the scammers were buying on TradeHill with fraudulent Dwolla money, and selling on Mt. Gox. It would be kind of silly to try and sell BTC that you stole from an exchange on the same exchange.