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Author Topic: Press Release - TradeHill, Inc. Files Suit Against Dwolla, Inc.  (Read 11930 times)
Jered Kenna (TradeHill)
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March 06, 2012, 07:13:06 PM
 #1

www.tradehillblog.com

FOR IMMEDIATE RELEASE:    
TradeHill, Inc. Files Suit Against Dwolla, Inc.



San Francisco, California - March 6th 2012 - As we have mentioned in previous press releases and blog posts, we at TradeHill believe we unjustifiably lost tens of thousands of dollars when we used Dwolla as our money transmitter during June and July 2011.  We spent months attempting to contact Dwolla to resolve this dispute but were met with silence or obfuscations.  To this day, though Dwolla has claimed these losses were due to chargebacks, we have not received any kind of documentation accounting for those losses.  Regardless, Dwolla's contracts and advertisements from the time specifically and repeatedly highlighted a "no chargeback" policy.

As a result of these losses, TradeHill was unable to pay its employees and was forced to shut down exchange operations on February 13, 2012.  We did not want to do this.  We believe in Bitcoin and greatly enjoyed being involved in the community in such an integral way.  Though we had hoped to continue different business operations on bitcoin.com, we were contractually obligated to return that domain name (along with bitcoin.co and bitcoin.co.nz) once we stopped operating as an exchange.  As such, bitcoin.com is no longer owned and operated by TradeHill.

Yesterday, TradeHill filed a complaint for damages in the United States District Court for the Northern District of California against Dwolla and two of its officers.  In the complaint, we allege that Dwolla fraudulently reversed nearly $100,000 in supposedly "credited" transactions and unjustifiably blocked an attempt by TradeHill to transfer $70,000 of its funds from Dwolla's control.  Besides these direct damages, TradeHill is also claiming damages resulting from Dwolla's actions, including the harm to TradeHill's reputation and the loss of bitcoin.com, a very valuable domain.

We have received confirmation from other former Dwolla customers that they also lost money when Dwolla reversed supposedly completed and credited transactions without notice and in violation of Dwolla's own policies.  If you also believe you were treated in a similar fashion by Dwolla, do not hesitate to contact us.



Jered Kenna
Chief Executive Officer
TradeHill

Twitter: @jeredkenna   @tradehill
Please send all press inquiries to press@tradehill.com

ENDS

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Jered Kenna (TradeHill)
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March 06, 2012, 07:14:00 PM
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reserved

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March 06, 2012, 07:17:42 PM
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Good luck with this Jered! That was a terrible cost for you guys to endure just as you started up business.
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March 06, 2012, 07:19:55 PM
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Good luck to you guys. I hope to see Tradehill back online soon.
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March 06, 2012, 07:23:16 PM
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Besides these direct damages, TradeHill is also claiming damages resulting from Dwolla's actions, including the harm to TradeHill's reputation and the loss of bitcoin.com, a very valuable domain.
WTF how does this happen? Didn't have enough cash on hand to pay a $10 renewal fee to the registrar? Please enlighten me, and correct me if I am wrong.

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Jered Kenna (TradeHill)
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March 06, 2012, 07:26:46 PM
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Besides these direct damages, TradeHill is also claiming damages resulting from Dwolla's actions, including the harm to TradeHill's reputation and the loss of bitcoin.com, a very valuable domain.
WTF how does this happen? Didn't have enough cash on hand to pay a $10 renewal fee to the registrar? Please enlighten me, and correct me if I am wrong.

No, that wouldn't be forgivable. We acquired the domain and as part of the deal we were contractually obligated to keep the exchange running. When we decided to shut the exchange down we returned the domain to the original owner who I believe is going to do good things with it. It will revert over in a few days most likely.

-Jered

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March 06, 2012, 07:26:51 PM
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Really?  Ya, what happened to bitcoin.com?

I support TradeHill.
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March 06, 2012, 07:30:59 PM
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Besides these direct damages, TradeHill is also claiming damages resulting from Dwolla's actions, including the harm to TradeHill's reputation and the loss of bitcoin.com, a very valuable domain.
WTF how does this happen? Didn't have enough cash on hand to pay a $10 renewal fee to the registrar? Please enlighten me, and correct me if I am wrong.

No, that wouldn't be forgivable. We acquired the domain and as part of the deal we were contractually obligated to keep the exchange running. When we decided to shut the exchange down we returned the domain to the original owner who I believe is going to do good things with it. It will revert over in a few days most likely.

-Jered

Who is this so-called "owner" ?

Satoshi maybe Shocked
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March 06, 2012, 07:32:18 PM
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Besides these direct damages, TradeHill is also claiming damages resulting from Dwolla's actions, including the harm to TradeHill's reputation and the loss of bitcoin.com, a very valuable domain.
WTF how does this happen? Didn't have enough cash on hand to pay a $10 renewal fee to the registrar? Please enlighten me, and correct me if I am wrong.

No, that wouldn't be forgivable. We acquired the domain and as part of the deal we were contractually obligated to keep the exchange running. When we decided to shut the exchange down we returned the domain to the original owner who I believe is going to do good things with it. It will revert over in a few days most likely.

-Jered
Thanks for the clarification. Best wishes for a speedy trial and full settlement in your favor.

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March 06, 2012, 07:33:34 PM
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Who is this so-called "owner" ?

Satoshi maybe Shocked

How funny would that be if he took all these infinite steps to remain anonymous, and nobody could figure out who it was, and he forgot about the WHOIS details on bitcoin.com... Wink
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March 06, 2012, 07:35:56 PM
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Good luck Jered.  It's very clear to me that what Dwolla was providing was nothing more than a value add on top of ACH…while I've not reviewed their original terms of service, it seems they were asserting that their transactions were not reversible, yet when they had some ACHs reversed on them, they didn't follow through on that commitment.

(gasteve on IRC) Does your website accept cash? https://bitpay.com
Jered Kenna (TradeHill)
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March 06, 2012, 07:47:27 PM
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Who is this so-called "owner" ?

Satoshi maybe Shocked

I don't believe so but he wants to remain anonymous and not only do I respect that decision I'm legally obligated to comply with it.
If it turns out he is Satoshi I'm going to be upset I didn't know at the time, I would have asked slightly different questions.


Good luck Jered.  It's very clear to me that what Dwolla was providing was nothing more than a value add on top of ACH…while I've not reviewed their original terms of service, it seems they were asserting that their transactions were not reversible, yet when they had some ACHs reversed on them, they didn't follow through on that commitment.


They were very clear about it and I agree with you. I'm going to limit my comments on the lawsuit and stick to TradeHill / Bitcoin issues from here out though. It'll keep my attorney from getting mad at me.

-Jered

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March 06, 2012, 07:52:43 PM
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I wish you guys luck. I've got a lot of respect for the manner in which tradehill operated...hope to see you guys back in action, waving fat paychecks courtesy of the scumbags at dwolla.
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March 06, 2012, 08:01:55 PM
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You can voice your opinions at Dwolla's Facebook page:

https://www.facebook.com/#!/dwolla
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March 06, 2012, 08:02:11 PM
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WIsh you all the best luck with your case.



What if the original owner of bitcoin.com was RealSolid? ^^
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March 06, 2012, 08:10:00 PM
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WIsh you all the best luck with your case.



What if the original owner of bitcoin.com was RealSolid? ^^

That would make about as much sense as the free masons squatting on it with funding from Blackwater. Tongue

And so it begins. We just cannot catch a break from cash to bitcoin services, can we?
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March 06, 2012, 09:48:52 PM
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I hope the lawsuit end as expeditiously as possible, or otherwise, only the lawyers will win.

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March 06, 2012, 09:50:08 PM
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Interesting!

I wonder if the startup world will notice this lawsuit.

Keep us updated!

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March 06, 2012, 09:53:09 PM
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Quote
As a result of these losses, TradeHill was unable to pay its employees and was forced to shut down exchange operations on February 13, 2012.  We did not want to do this.  We believe in Bitcoin and greatly enjoyed being involved in the community in such an integral way.  Though we had hoped to continue different business operations on bitcoin.com, we were contractually obligated to return that domain name (along with bitcoin.co and bitcoin.co.nz) once we stopped operating as an exchange.  As such, bitcoin.com is no longer owned and operated by TradeHill.

I am extremely surprised. As far as I know, you did not disclose to us that the bitcoin.com domain have a constructional obligation tied into it until today. Now, it simply redirect to bitcoin.org.

Who is the owner of this bitcoin.com and what are they going to do with it? Is it satoshi.

Jered Kenna (TradeHill)
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March 06, 2012, 10:02:44 PM
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Quote
As a result of these losses, TradeHill was unable to pay its employees and was forced to shut down exchange operations on February 13, 2012.  We did not want to do this.  We believe in Bitcoin and greatly enjoyed being involved in the community in such an integral way.  Though we had hoped to continue different business operations on bitcoin.com, we were contractually obligated to return that domain name (along with bitcoin.co and bitcoin.co.nz) once we stopped operating as an exchange.  As such, bitcoin.com is no longer owned and operated by TradeHill.

I am extremely surprised. As far as I know, you did not disclose to us that the bitcoin.com domain have a constructional obligation tied into it until today. Now, it simply redirect to bitcoin.org.

Who is the owner of this bitcoin.com and what are they going to do with it? Is it satoshi.

We wanted to keep operating and hold on to the domain but it just wasn't possible. Ideally it wouldn't have mattered that we had that obligation but things changed when we lost the funds. We weren't able to innovate and had to cut all the features / employees we had planned. I've personally blown all my savings to stay afloat.  

I'm not 100% sure what they have planned for bitcoin.com and if I find out they'll probably ask me to keep it under wraps. I believe they really want to see Bitcoin succeed though and are going to do amazing things for it.

I can't say with 100% certainty that it's not Satoshi but I don't have anything to make me believe that it is.

-Jered

Edit: I'm happy to return coins to anyone who donated to the bitcoin.com project as I won't be working on it directly unfortunately. Just shoot us an email.

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March 06, 2012, 10:08:30 PM
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You can voice your opinions at Dwolla's Facebook page:

https://www.facebook.com/#!/dwolla

I will voice it and continue NOT using Dwolla nor MtGox which is using Dwolla.
Good luck to TH against Dwolla: we support your cause.

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March 06, 2012, 10:10:08 PM
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Sorry to hear about the lawsuit Jered.

I understand arming yourself with as many complaints as possible but don't think there is any legal reason why they would be held responsible for a private agreement related to bitcoin.com.

As for the reversed charges, that's something you should sue them to hell and back for. Companies that tout themselves are infallible shouldn't be allowed to bankrupt their customers when they actually do fail.

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March 06, 2012, 10:15:00 PM
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Best of luck guys. Besides damages and the money they stole from you, Dwolla should get jail time for this.
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March 06, 2012, 10:17:47 PM
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Best of luck guys. Besides damages and the money they stole from you, Dwolla should get jail time for this.

They would have to have been proven to have intent to defraud their merchants, which I doubt they had.

This seems more like a case of them just not doing what they promised they'd do, and doing what they promised they wouldn't.

Jial? Seriously?

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March 06, 2012, 10:19:50 PM
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Best of luck guys. Besides damages and the money they stole from you, Dwolla should get jail time for this.

They would have to have been proven to have intent to defraud their merchants, which I doubt they had.

This seems more like a case of them just not doing what they promised they'd do, and doing what they promised they wouldn't.

Jial? Seriously?

Editing old account statements to erase reversed credits, in order to hide when they removed funds from the account? Um hell yes, jail. That's fraud.
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March 06, 2012, 10:20:39 PM
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We wanted to keep operating and hold on to the domain but it just wasn't possible. Ideally it wouldn't have mattered that we had that obligation but things changed when we lost the funds. We weren't able to innovate and had to cut all the features / employees we had planned. I've personally blown all my savings to stay afloat.  


Does that mean you're going to provide services as planned in bitcoin.com? If not, what will happen?

Anyway, wish you best of luck and the most expeditious lawsuit as possible.

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March 06, 2012, 10:21:23 PM
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Best of luck guys. Besides damages and the money they stole from you, Dwolla should get jail time for this.

They would have to have been proven to have intent to defraud their merchants, which I doubt they had.

This seems more like a case of them just not doing what they promised they'd do, and doing what they promised they wouldn't.

Jial? Seriously?

Editing old account statements to erase reversed credits, in order to hide when they removed funds from the account? Um hell yes, jail. That's fraud.


That's hearsay. You'd have to prove that's why they were erased. On that note-- what proof do you have that they erased records?

Does Tradehill have a list of records that doesn't match Dwolla's? If so, how do you know Tradehill didn't forge them?

(For the record, I hope justice is served, but don't be so quick to pick sides and pretend that anything against Bitcoin businesses is worthy of jailtime.)

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March 06, 2012, 10:26:39 PM
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Best of luck guys. Besides damages and the money they stole from you, Dwolla should get jail time for this.

They would have to have been proven to have intent to defraud their merchants, which I doubt they had.

This seems more like a case of them just not doing what they promised they'd do, and doing what they promised they wouldn't.

Jial? Seriously?

Editing old account statements to erase reversed credits, in order to hide when they removed funds from the account? Um hell yes, jail. That's fraud.


That's hearsay. You'd have to prove that's why they were erased. On that note-- what proof do you have that they erased records?

Does Tradehill have a list of records that doesn't match Dwolla's? If so, how do you know Tradehill didn't forge them?

(For the record, I hope justice is served, but don't be so quick to pick sides and pretend that anything against Bitcoin businesses is worthy of jailtime.)

Either you're incredibly ignorant of this situation, or you're trolling again. Either way, you look like an ass.
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March 06, 2012, 10:28:04 PM
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Either you're incredibly ignorant of this situation, or you're trolling again. Either way, you look like an ass.

I just heard about it 2 minutes ago, both never exclude the latter.

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March 06, 2012, 10:35:25 PM
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I wish you a favorable resolve and your money returned + damages repayed.

My personality type: INTJ - please forgive my weaknesses (Not naturally in tune with others feelings; may be insensitive at times, tend to respond to conflict with logic and reason, tend to believe I'm always right)

If however you enjoyed my post: 15j781DjuJeVsZgYbDVt2NZsGrWKRWFHpp
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March 06, 2012, 10:36:23 PM
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This is really a civil matter.  Jail time sounds like the ridiculous demand of a lynch mob.  Frankly, I think $2M is pretty optimistic though, on ~100k of direct damages. Hope it works out well for them.

And for the record, I think he looks like a horse.
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March 06, 2012, 10:38:13 PM
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This is really a civil matter.  Jail time sounds like the ridiculous demand of a lynch mob.  Frankly, I think $2M is pretty optimistic though, on ~100k of direct damages. Hope it works out well for them.

And for the record, I think he looks like a horse.
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March 06, 2012, 10:46:14 PM
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This is really a civil matter.  Jail time sounds like the ridiculous demand of a lynch mob.  Frankly, I think $2M is pretty optimistic though, on ~100k of direct damages. Hope it works out well for them.

And for the record, I think he looks like a horse.

If a financial institution you trusted did the same thing to you, I'm betting it'd sound a lot less "ridiculous." But I didn't make any demands, I was just showing my support. This was a despicable act.

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March 06, 2012, 10:47:27 PM
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More Dwolla arrogance:

Quote
Longtime angel investor Steve Smith said the lawsuit filed against Dwolla could be “sour grapes” and that the timing of the lawsuit after months of trying to come to an agreement is questionable. Dwolla recently raised $5 million for its operations from venture capital firms across the country.
 
“This is the practical reality of the current business environment we live in,” Smith said. “Lawsuits are just becoming an increasing part of the business community.”
http://blogs.desmoinesregister.com/dmr/index.php/2012/03/06/bitcoin-exchanges-files-lawsuit-against-dwolla/
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March 06, 2012, 10:51:09 PM
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This is really a civil matter.  Jail time sounds like the ridiculous demand of a lynch mob.  Frankly, I think $2M is pretty optimistic though, on ~100k of direct damages. Hope it works out well for them.

And for the record, I think he looks like a horse.

If a financial institution you trusted did the same thing to you, I'm betting it'd sound a lot less "ridiculous." But I didn't make any demands, I was just showing my support. This was a despicable act.



Let's all support TradeHill for realistic expectations and realistic settlements, and open to the possibility they might actually be in the wrong, not Dwolla.

Anything else is blind fanboyism and we don't have room for that in a cryptocurrency already considered a scam and ponzi by most of the nerd world.

Let's show our intelligence and look at evidence. Jered hasn't provided any to us because his lawyer doesn't want him to at this point.

e.g. There is nothing to support.

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March 06, 2012, 11:02:45 PM
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This is really a civil matter.  Jail time sounds like the ridiculous demand of a lynch mob.  Frankly, I think $2M is pretty optimistic though, on ~100k of direct damages. Hope it works out well for them.

And for the record, I think he looks like a horse.

If a financial institution you trusted did the same thing to you, I'm betting it'd sound a lot less "ridiculous." But I didn't make any demands, I was just showing my support. This was a despicable act.



Let's all support TradeHill for realistic expectations and realistic settlements, and open to the possibility they might actually be in the wrong, not Dwolla.

Anything else is blind fanboyism and we don't have room for that in a cryptocurrency already considered a scam and ponzi by most of the nerd world.

Let's show our intelligence and look at evidence. Jered hasn't provided any to us because his lawyer doesn't want him to at this point.

e.g. There is nothing to support.

How can you call anyone else blind when you admit you're completely ignorant? Supposing that Tradehill engineered their own downfall in order to take Dwolla to court without any evidence is the silliest thing I've ever heard. Some of us saw the interviews, the press releases, and had conversations with Tradehill as this was happening. Calling those people "blind" isn't showing your intelligence.

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March 06, 2012, 11:09:11 PM
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How can you call anyone else blind when you admit you're completely ignorant?

Pretty easily actually. I just did!

Supposing that Tradehill engineered their own downfall in order to take Dwolla to court
Sorry, didn't read because it had nothing to do with what I was talking about and you're just spouting conspiracy theories as a defense.

Since you didn't get my point, I'll reiterate:

Don't trust people or companies just because they claim things. If the company themselves are not willing to share the documents that they claim prove something, then hold off on the fanboying until you know for sure.

How is that not simply common sense?

I don't have a dog in the fight. If Dwolla losses the suit because a judge finds them guilty of fraud, I'll say "Good job Tradehill!" and if Dwolla wins because TradeHill had no evidence and just couldn't deal with losing money I'll say "Good job Dwolla!".

This community is thick sometimes. We're not talking about supporting a friend, we're talking about staking reputations on something we have no evidence for.

You think I'm ignorant for not wanting to do that? Wow.

Editing old account statements to erase reversed credits

Where are the documents that have had the transactions removed?

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March 06, 2012, 11:13:05 PM
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How can you call anyone else blind when you admit you're completely ignorant?

Pretty easily actually. I just did!

Supposing that Tradehill engineered their own downfall in order to take Dwolla to court
Sorry, didn't read because it had nothing to do with what I was talking about and you're just spouting conspiracy theories as a defense.

Since you didn't get my point, I'll reiterate:

Don't trust people or companies just because they claim things. If the company themselves are not willing to share the documents that they claim prove something, then hold off on the fanboying until you know for sure.

How is that not simply common sense?

I don't have a dog in the fight. If Dwolla losses the suit because a judge finds them guilty of fraud, I'll say "Good job Tradehill!" and if Dwolla wins because TradeHill had no evidence and just couldn't deal with losing money I'll say "Good job Dwolla!".

This community is thick sometimes. We're not talking about supporting a friend, we're talking about staking reputations on something we have no evidence for.

You think I'm ignorant for not wanting to do that? Wow.

Where are the documents that have had the transactions removed?

I'm glad you're proud of how easily you make foolish statements.

The reason I think you're ignorant because you SAID you were. This happened last year. Plenty of people know the details, you've admitted you're not one of them. So instead of arguing about what MY opinion should be, maybe you should go do your homework.  I based mine on all the information that anyone not directly involved with this lawsuit can reasonably expect to get, and I'm fairly confident that my conclusion is correct.
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March 06, 2012, 11:14:00 PM
 #39

Here we go, publicity! Hope to see an article on this in ArsTechnica....

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March 06, 2012, 11:16:08 PM
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I based mine on all the information that anyone not directly involved with this lawsuit can reasonably expect to get, and I'm fairly confident that my conclusion is correct.

So instead of arguing about what MY opinion should be, maybe you should go do your homework.

Fair enough. Any tips on finding the proof that Dwolla was erasing chargebacks to cover their asses?

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March 06, 2012, 11:24:17 PM
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Here we go, publicity! Hope to see an article on this in ArsTechnica....

I wish we can get some positive publicity for a change.

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March 06, 2012, 11:25:04 PM
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From all of my experiences with Dwolla it seems like they act like a corporation, have no sense of humility, and resembles PayPal.

Many of us have been through the TradeHill fiasco last year.  From what I know about TradeHill they seem to have a lot of integrity since I've seen them in videos, in the forum posts, and in emails.

It is ridiculous that anyone would think they engineered their own downfall last year, waited for the $5 million investment in Dwolla, so they could sue them for $2 million.  This is defintely not a case of "sour grapes" as Dwolla's angel investor has said.

TradeHill posted some of their data on Dwolla, if I remember correctly.  Dwolla however has not said very much.
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March 06, 2012, 11:28:45 PM
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From all of my experiences with Dwolla it seems like they act like a corporation, have no sense of humility, and resembles PayPal.

Many of us have been through the TradeHill fiasco last year.  From what I know about TradeHill they seem to have a lot of integrity since I've seen them in videos, in the forum posts, and in emails.

Yeah. They're real communicators and owe up to their mistakes.

Corporation are to me, highly defaced, zero authenticity, every single channel managed by PR, etc. When people shout at the corporations, the corporation doesn't seem to reply and keep doing the same thing oblivious to people's problem.

I like people who actually talk to their customer, very casual, and no nonsense. That's reassuring to me.

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March 06, 2012, 11:30:13 PM
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If you're asking for their books, you're probably not going to get those.

If you want more information, I would start with the Bitcoin Show episode where Bruce had them on live to explain what was happening and try to warn other exchanges. They played some phonecalls with Dwolla that didn't make Dwolla look very respectable.

As a high volume trader I talked to all of the guys that ran Tradehill on a regular basis, mainly as a client, but also as a fellow bitcoin entrepreneur. They are very nice and genuine people. This kind of relationship isn't "hard proof" but I know who I was dealing with and everything they said during that time, as well as now, sounds very credible to me. Not only that, but they had no reason to lie. I trusted them before, during, and ever since with more money than I could afford to lose, and they've always been very transparent and quick to respond (unlike some exchanges.)

So that's why I don't feel it's very fair to call my support for Tradehill "blind fanboyism." I'm an appreciative long-term client, and without working directly for them (hence having access to their private records), I don't think I could reasonably be more informed.

I wasn't trying to be inflammatory with my statement about Dwolla - I guess it came across that way, but I just assumed most people who looked at this thread would have seen more of what I've seen and understand where I was coming form.
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March 06, 2012, 11:39:58 PM
 #45

Many thoughts running through my mind after reading this. Considering shorting BTC. Dwolla probably relies a lot on Bitcoin-related businesses for revenue, but all the trouble they're having might push them toward dumping all Bitcoin-businesses as Paxum did instead of fixing their problems. Dwolla's a pretty small start-up... Hopefully they can't afford to dis-associate from Bitcoin. I know a LOT of people who use Dwolla. It's pretty darn close to free for US citizens to get cash into an exchange, and it's the only method I've ever used to transfer money into an exchange. So close to seeing a sustained push through $5, too. Hmm.

Either way - good luck, TH.

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March 06, 2012, 11:53:56 PM
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Dwolla has $5 million now.  I would expect them to settle and move on.  Good luck!

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March 06, 2012, 11:54:46 PM
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If you're asking for their books, you're probably not going to get those.

If you want more information, I would start with the Bitcoin Show episode where Bruce had them on live to explain what was happening and try to warn other exchanges. They played some phonecalls with Dwolla that didn't make Dwolla look very respectable.

As a high volume trader I talked to all of the guys that ran Tradehill on a regular basis, mainly as a client, but also as a fellow bitcoin entrepreneur. They are very nice and genuine people. This kind of relationship isn't "hard proof" but I know who I was dealing with and everything they said during that time, as well as now, sounds very credible to me. Not only that, but they had no reason to lie. I trusted them before, during, and ever since with more money than I could afford to lose, and they've always been very transparent and quick to respond (unlike some exchanges.)

So that's why I don't feel it's very fair to call my support for Tradehill "blind fanboyism." I'm an appreciative long-term client, and without working directly for them (hence having access to their private records), I don't think I could reasonably be more informed.

I wasn't trying to be inflammatory with my statement about Dwolla - I guess it came across that way, but I just assumed most people who looked at this thread would have seen more of what I've seen and understand where I was coming form.

My bad. I'll read up more on it before I say anything else here.

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March 06, 2012, 11:55:16 PM
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Many thoughts running through my mind after reading this. Considering shorting BTC. Dwolla probably relies a lot on Bitcoin-related businesses for revenue, but all the trouble they're having might push them toward dumping all Bitcoin-businesses as Paxum did instead of fixing their problems. Dwolla's a pretty small start-up... Hopefully they can't afford to dis-associate from Bitcoin. I know a LOT of people who use Dwolla. It's pretty darn close to free for US citizens to get cash into an exchange, and it's the only method I've ever used to transfer money into reserves. So close to seeing a sustained push through $5, too. Hmm.

Either way - good luck, TH.

We're a small portion of their business now and they are never really part of our community to begin with.

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March 07, 2012, 12:21:37 AM
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Just for anyone who might be new or who might have missed the controversy between TradeHill and Dwolla last summer, this should give you an idea.  According to the datestamp, I made it on July 27th 2011.  That was after reading this thread posted by TradeHill, explaining their side of things.

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March 07, 2012, 12:41:23 AM
 #50

Many thoughts running through my mind after reading this. Considering shorting BTC. Dwolla probably relies a lot on Bitcoin-related businesses for revenue, but all the trouble they're having might push them toward dumping all Bitcoin-businesses as Paxum did instead of fixing their problems. Dwolla's a pretty small start-up... Hopefully they can't afford to dis-associate from Bitcoin. I know a LOT of people who use Dwolla. It's pretty darn close to free for US citizens to get cash into an exchange, and it's the only method I've ever used to transfer money into reserves. So close to seeing a sustained push through $5, too. Hmm.

Either way - good luck, TH.

We're a small portion of their business now and they are never really part of our community to begin with.

i was there when Dwolla first got started last Spring and i think Bitcoin made a huge contribution to their initial business push.  i remember calling them and they were thrilled by the business brought in by Bitcoin users.  it was off to the races for them after that.
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March 07, 2012, 12:43:12 AM
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You guys might want to make your statements known to TradeHill in case Dwolla claims otherwise.

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March 07, 2012, 01:00:41 AM
 #52

Jered,

Good luck man!


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March 07, 2012, 01:05:38 AM
 #53

http://www.reuters.com/article/2012/02/07/idUS94197123920120207

Quote
“When we started, I was kind of naive,” said Milne. “I just called up the regulators and asked how we should do this. Luckily they didn’t shut us down. So yeah, we have a good dialogue going on with Federal Reserve.”

'nough said?
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March 07, 2012, 02:45:23 AM
 #54

http://www.betabeat.com/2012/03/06/dwolla-releases-statement-on-that-bitcoin-lawsuit/

TH hasn't served the lawsuit yet to Dwolla.
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March 07, 2012, 02:51:42 AM
 #55


Bad form.
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March 07, 2012, 03:06:06 AM
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I wish I noticed this when I signed up.



Good luck TH.

http://www.reuters.com/article/2012/02/07/idUS94197123920120207
Quote
“When we started, I was kind of naive,” said Milne. “I just called up the regulators and asked how we should do this. Luckily they didn’t shut us down. So yeah, we have a good dialogue going on with Federal Reserve.


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March 07, 2012, 03:12:25 AM
 #57


From that page, bolding added by me:

"Most all merchants are well aware of the problem, which is why we’ve always had something in our terms of service about chargebacks since Day One. Notably, there are certain types of businesses and marketplaces that are continued targets for illegal activity and, just like we work hard to protect and improve our community, a similar expectation should be assumed on behalf of merchants participating in high-risk industries. If any merchant continues to be a source of systemic fraud and we cannot come to an agreement, we will always take the appropriate actions."
--------------------------

I do not have copies of the TOS, but I did read it and do not remember anything about chargebacks, and do remember them saying that there were no chargebacks.  Posting something like the above, that may be proven to be untrue in the courtroom looks like a bad start on Dwolla's part.  Does anyone have the OLD TOS from Dwolla?

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March 07, 2012, 04:32:54 AM
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What's wrong with this? http://www.crunchbase.com/company/dwolla/diff/1/2 Anyone else sees it?

Compare the upload date in that diff screenshot with the upload date of the screenshots on the current page
http://www.crunchbase.com/company/dwolla/

For some further digging http://www.crunchbase.com/company/dwolla/revisions

They're cleaning up their tracks, and doing a lousy job while at it... Roll Eyes
 


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March 07, 2012, 05:14:25 AM
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I understand arming yourself with as many complaints as possible but don't think there is any legal reason why they would be held responsible for a private agreement related to bitcoin.com.
The damages are a consequence of their fraud. If someone intentionally and wrongfully throws a rock through your window when you're not home, and as a result, the rain damages your painting, shouldn't they also be responsible for the damage to the painting? Replacing the window doesn't make you whole.

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March 07, 2012, 05:25:07 AM
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I understand arming yourself with as many complaints as possible but don't think there is any legal reason why they would be held responsible for a private agreement related to bitcoin.com.
The damages are a consequence of their fraud. If someone intentionally and wrongfully throws a rock through your window when you're not home, and as a result, the rain damages your painting, shouldn't they also be responsible for the damage to the painting? Replacing the window doesn't make you whole.

Right, and when that rain water causes a letter you were writing to your aunt in Georgia to be destroyed telling her not to marry Mr. Butler because he is a gold digger and the wedding goes on as planned, later ending in a divorce that costs your aunt half of her estate, should the rock thrower pay for what the aunt lost in the other contract as well?

See how I did that? Using an equally ridiculous, non relevant extreme when we're talking about merchant/service contracts?

There is no way they are liable for the personal agreements that TradeHill makes. I don't care what sob story you tell a judge.

Paypal has made me lose my apartment by locking all my money once, and made one of my internet businesses bankrupt for lack of fluidity when locking my accounts for a ridiculous non-reason. Does that mean that I should charge Paypal for the hotel bill? Wouldn't that be lovely if the law worked that way? You could get everyone's first born child.

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March 07, 2012, 05:38:45 AM
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Right, and when that rain water causes a letter you were writing to your aunt in Georgia to be destroyed telling her not to marry Mr. Butler because he is a gold digger and the wedding goes on as planned, later ending in a divorce that costs your aunt half of her estate, should the rock thrower pay for what the aunt lost in the other contract as well?
Right. There's a continuum from damages that certainly should be the responsibility of the wrongdoer to damages that are too indirect. It comes down to whether this is a case akin to lost profits (which would be covered) or acts of a third party (which wouldn't unless they're forseeable, which these aren't).

"For the breach of an obligation arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate the party aggrieved for all the detriment proximately caused thereby, or which, in the ordinary course of things, would be likely to result therefrom."

Honestly, I don't know which side of the line this case falls on.

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March 07, 2012, 05:42:02 AM
 #62

Honestly, I don't know which side of the line this case falls on.

I don't either. TradeHill hasn't really released their "smoking gun" so everything is speculation at this point.

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March 07, 2012, 05:52:17 AM
 #63

Honestly, I don't know which side of the line this case falls on.

I don't either. TradeHill hasn't really released their "smoking gun" so everything is speculation at this point.

Seems like the old timers at the bitcoin forums can remember this clearly.  But, let's review the facts.  For me, this is one of the the smoking guns:

Using wayback machine no wording of "chargeback":

http://web.archive.org/web/20100730001213/http://www.dwolla.org/help/terms-of-use/

After the TH fiasco they added chargeback wording:

https://www.dwolla.com/tos  (Current tos)

And Ben Milne's lies:

"Most all merchants are well aware of the problem, which is why we’ve always had something in our terms of service about chargebacks since Day One. " - Ben Milne

Note Ben's uppercase use of "Day One".  Ben is a liar.  As a midwesterner, I am ashamed Ben is from Iowa.
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March 07, 2012, 06:00:39 AM
 #64

Unfortunately, lying in a public statement or even being incorrect in a claim is not against any laws.

What would be against the law is them breaking their contract. If the contract says that they can do whatever they want however (like Paypal's), then TradeHill is not suing about what they did, but about their sloppy and improper contracts.

Just assume Dwolla is Paypal and things become much simpler.


Note Ben's uppercase use of "Day One".  Ben is a liar.  As a midwesterner, I am ashamed Ben is from Iowa.

As a fellow midwesterner, I'm ashamed of Iowa period.


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March 07, 2012, 06:07:28 AM
 #65

Unfortunately, lying in a public statement or even being incorrect in a claim is not against any laws.

May not be against the law but can be used against you in the court of law.
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March 07, 2012, 06:09:05 AM
 #66

Unfortunately, lying in a public statement or even being incorrect in a claim is not against any laws.

May not be against the law but can be used against you in the court of law.

Tuché.

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March 07, 2012, 06:22:29 AM
 #67

2M $, great!

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March 07, 2012, 08:11:56 AM
 #68

I wish I noticed this when I signed up.



This is an unfortunate reality of US financial regulations.  You are legally required to retain information about money transfers for a period of time in case the Feds want to subpoena it.

I am hesitant to "blame" Dwolla for having this policy: the US government has forced their hand.  This is the price you pay to be a legitimate, FINCEN-compliant, money transfer business in the US.  Anything less would expose them to liability for violating Anti Money Laundering regulations in the Bank Secrecy Act and Patriot Act. 
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March 07, 2012, 08:20:35 AM
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It seems like many people in this thread are misconstruing Tradehill's legal strategy with their honest expectations.  

Like haggling, when you sue someone, you want to overstate your case, so you can 'compromise' back down to something reasonable.  I would be surprised if the Tradehill guys really felt they were going to get $2M, but it is a smart legal move to show the entirety of their losses that arguably resulted from Dwolla's chargebacks because it gives them room to negotiate towards the "fair" amount of damages.  If you start from the figure you think is fair, the most likely outcomes are that you will receive less than that.

My prediction is that Dwolla will settle for somewhere between 100k and 500k, because it seems like there is a valid argument that they did not pass liability of chargebacks onto their customers in their original TOS.  

Both of these services have been quite valuable to the Bitcoin community, and I hope they can reach a fair conclusion that allows both businesses to operate into the future.  A romantic optimism in me hopes that Tradehill will be able to use these funds to finance Money Service Business licencing across the US, becoming the first exchange that is unambiguously above-board in terms of US money transfer laws.  This will probably cost at least 300k though, so I am very cautiously hopeful.
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March 07, 2012, 04:33:36 PM
 #70

If you're asking for their books, you're probably not going to get those.

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March 07, 2012, 06:19:59 PM
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As a fellow midwesterner, I'm ashamed of Iowa period.



You're not down with the kermit-the-frog people of iowa? Maybe the most hysterical accent in the US...
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March 07, 2012, 07:16:56 PM
 #72

I can no longer access the Dwolla TOS:

https://www.dwolla.com/​tos
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March 07, 2012, 07:21:38 PM
 #73

Quote
I can no longer access the Dwolla TOS
Confirmed. Redirects to https://www.dwolla.com/404.aspx?aspxerrorpath=/%e2%80%8btos
Apparently they find another change is in order.

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March 07, 2012, 07:22:21 PM
 #74

I can no longer access the Dwolla TOS:

https://www.dwolla.com/​tos

You heard it here first. Free for all at Dwolla's house!
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March 07, 2012, 07:34:53 PM
 #75

Wait, I can access it...testing: https://www.dwolla.com/tos

UPDATE: Something seems to be wrong with the link I posted.  The above link works.
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March 07, 2012, 07:43:32 PM
 #76

Wait, I can access it...testing: https://www.dwolla.com/tos

UPDATE: Something seems to be wrong with the link I posted.  The above link works.
Yes. Earlier link is "https://www.dwolla.com/%E2%80%8Btos"

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March 07, 2012, 08:15:50 PM
 #77

Does anyone know whether there's a written contract for Dwolla merchant accounts?  If there was, that would prevail over the ToS or any other information on their website.

All I can say is that this is Bitcoin. I don't believe it until I see six confirmations.
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March 07, 2012, 08:34:26 PM
 #78

Dwolla stands to loose A LOT MORE than money if they loose this lawsuit: They can loose one or all of their MONEY TRANSMITTING LICENSES, which are very expensive and arduos to get. Whoever was the moron at Dwolla that decided erasing records from the database was a good idea should be banging his/her head against the wall just about now.

Without the licenses, Dwolla is NOTHING, just a badly designed website.

If the directors of Dwolla have some sort of functioning collective brain, they should quickly and promptly settle this issue with Dwolla before it is even brought up to trial or court settlement. They DO NOT want this on their records, but the guy that started Dwolla seems to be pretty stupid from what I gather from other colleagues, so I wouldn't be surprised if their business comes crumbling down like a house made of a deck of cards.

I am sure their angel investors are starting to crap their pants just about now. This is pretty serious.
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March 07, 2012, 08:41:20 PM
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Quote

... "Dwolla and its executives have been named in a federal lawsuit seeking $2 million in damages and alleging nine different offenses, including racketeering, false advertising, breach of contract and intentional misrepresentation.

TradeHill, an online currency exchanger based in San Francisco and Chile, filed the 19-page lawsuit Monday. It names CEO Ben Milne and COO Charise Flynn, along with the company and five other undetermined defendants and was filed in a northern California court." ...

Source: http://blogs.desmoinesregister.com/dmr/index.php/2012/03/06/bitcoin-exchanges-files-lawsuit-against-dwolla/


Woooh mama! Things will be getting red hot for Dwolla ... would you want that kind of press while most of your money transmitting licensing applications are still pending on key states?

Open advise to Ben Milne: I know you are not that bright, and I know this whole thing grew beyond your limited knowledge of how to conduct business and the financial world in general, but I would say this: try to settle with Tradehill soon. State financial secretaries won't give you a money transmitting license for petty things like having somebody suing you for stealing socks, so you do the math on how much are those 100K that you owe to Tradehill going to really cost you personally and your business.
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March 07, 2012, 08:51:21 PM
 #80


That source is a blog (with spelling mistakes).

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March 08, 2012, 02:30:51 AM
 #81

ars weighs in:

http://arstechnica.com/tech-policy/news/2012/03/lawsuit-illustrates-bitcoins-chargeback-problem.ars
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March 08, 2012, 05:24:13 AM
 #82


"Bitcoin's chargeback problem" - oh, the irony.


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March 08, 2012, 05:27:10 AM
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I think they meant "Bitcoin's NO chargeback problem"... idiots!

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March 08, 2012, 05:27:49 AM
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Infidels!

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March 08, 2012, 04:36:41 PM
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Why didn't Dwolla go to Tradehill right when they realized they had incurred losses that would directly affect Tradehill and work out some arrangement?
If a company is a significant portion of your business and you throw them under the bus to save your own assets what does that say about you?

It should have never reached this point. Tradehill would still be around if Dwolla approached them early and we would've been less aware of how incompetent Dwolla really is.

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March 08, 2012, 08:06:23 PM
 #86

Watching.

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March 08, 2012, 09:13:30 PM
 #87

Quote
My prediction is that Dwolla will settle for somewhere between 100k and 500k, because it seems like there is a valid argument that they did not pass liability of chargebacks onto their customers in their original TOS.

Afterwards, they can contact a Meze Grill customer on how to get out from paying the settlement.
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March 08, 2012, 09:15:32 PM
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My prediction is that Dwolla will settle for somewhere between 100k and 500k, because it seems like there is a valid argument that they did not pass liability of chargebacks onto their customers in their original TOS.

Afterwards, they can contact a Meze Grill customer on how to get out from paying the settlement.


I hear it involves moving to another state and latching on to a group of greedy people obsessed with anonymity and selling them promises.

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March 08, 2012, 09:35:08 PM
 #89

maybe dwolla will "find" a hair in their settlement.
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March 08, 2012, 10:59:30 PM
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Yep, and that would still be a moronic statement from them. There are no problems with a "no chargeback" irrevocable policy. Ask any merchant that has to deal with Visa and MasterCards, and assholes getting free services and goods from them.

Case in point: Some years ago some scammer put a buy order on our website (for liberty reserve, irrevocable). Some idiot bought a supposed car on ebay, from a dude he never seen. The car "seller" of course gave the wire instructions for the LR order to the victim. The victim sent a wire transfer to fullfil the order the scammer put through on our site. Later of course, the moron realized that there was no car, and that he sent an international wire transfer to an unknown party from an auction site. Wire recall ensued of course. At this point we already had delivered the LR.

Question is: Why do I have to pay for some retarded idiot that purchases a vehicle online from some nigerian scammer? Why do I have to absorb this loss? Nowadays, we have better procedures and detection tools for these types of scams, but are still very possible.

To me, the money lost from the victim should be viewed as a tax on his idiocy, period.
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March 08, 2012, 11:03:55 PM
 #91

Chargebacks don't protect the consumer, it protects the morons and the crooks. Back in the day when you had to pay with coins, cash or tade, people did their math before forking over the money to somebody. Another dent on darwinism. Let's keep the idiot's money safe! Learn how to secure your wealth and how to spend it, because if you don't somebody (the merchant) will have to pay for your sorry ass! Sorry I am getting all riled up here Cheesy
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March 08, 2012, 11:13:24 PM
 #92

Chargebacks don't protect the consumer, it protects the morons and the crooks.
If you mean ACH chargebacks, 100% agree. If you mean credit card chargebacks, 100% disagree. (The big difference is that an ACH transfer is an actual payment. A credit card is an extension of credit.)

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March 08, 2012, 11:13:51 PM
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Chargebacks don't protect the consumer, it protects the morons and the crooks. Back in the day when you had to pay with coins, cash or tade, people did their math before forking over the money to somebody. Another dent on darwinism. Let's keep the idiot's money safe! Learn how to secure your wealth and how to spend it, because if you don't somebody (the merchant) will have to pay for your sorry ass! Sorry I am getting all riled up here Cheesy

+1

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March 08, 2012, 11:36:23 PM
 #94

Chargebacks don't protect the consumer, it protects the morons and the crooks.
If you mean ACH chargebacks, 100% agree. If you mean credit card chargebacks, 100% disagree. (The big difference is that an ACH transfer is an actual payment. A credit card is an extension of credit.)

It is an extension of credit on the customer, not the merchant. If the customer does something dumb with the line of credit, it should be their responsibility, not the merchant's. At most, it should be a problem shared by the customer and the bank that extended the credit. This is akin to a mortgage in a house: if you bought a 400K 1 bdr appartment in LA before the bubble bursted, you and the bank are stuck with the debt, and you pay the price, not the seller of the property.

While I do understand there should be some merchantability protection for the consumer, it seems to me that the merchant ALWAYS ends up paying for the broken dishes, not the banks, and almost never the consumer. This is by the way, after the merchant has already been pounded by some irrational "processing fee" by the credit card companies.
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March 09, 2012, 12:04:14 AM
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Chargebacks don't protect the consumer, it protects the morons and the crooks.
If you mean ACH chargebacks, 100% agree. If you mean credit card chargebacks, 100% disagree. (The big difference is that an ACH transfer is an actual payment. A credit card is an extension of credit.)

It is an extension of credit on the customer, not the merchant. If the customer does something dumb with the line of credit, it should be their responsibility, not the merchant's. At most, it should be a problem shared by the customer and the bank that extended the credit. This is akin to a mortgage in a house: if you bought a 400K 1 bdr appartment in LA before the bubble bursted, you and the bank are stuck with the debt, and you pay the price, not the seller of the property.

While I do understand there should be some merchantability protection for the consumer, it seems to me that the merchant ALWAYS ends up paying for the broken dishes, not the banks, and almost never the consumer. This is by the way, after the merchant has already been pounded by some irrational "processing fee" by the credit card companies.

Yep.

And credit cards are broken by design:
"Can I buy that candy bar?"
"Sure, just give me enough personal information to charge you up to your credit limit so I can store it within reach all my of employees."

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March 09, 2012, 12:14:12 AM
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Yep.

And credit cards are broken by design:
"Can I buy that candy bar?"
"Sure, just give me enough personal information to charge you up to your credit limit so I can store it within reach all my of employees."
[/quote]

LOL true. You should watch that stand up of George Carlin bitching about dumb people paying for a pack of cigarrettes with a credit card instead of carrying cash.
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March 09, 2012, 01:41:31 AM
 #97

It is an extension of credit on the customer, not the merchant.
Yes, but it is an extension of credit (to some extent) *by* the merchant.

Quote
If the customer does something dumb with the line of credit, it should be their responsibility, not the merchant's.
It is. And one of the things a customer might do when someone who extended them credit fails to comply with the terms of the agreement is not pay them.

Quote
At most, it should be a problem shared by the customer and the bank that extended the credit.
The bank didn't extend the credit until and unless the service is completed and accepted by the customer. Until then, the merchant has extended the credit.

Quote
This is akin to a mortgage in a house: if you bought a 400K 1 bdr appartment in LA before the bubble bursted, you and the bank are stuck with the debt, and you pay the price, not the seller of the property.
Right, that's because mortgages are not like credit cards. In the case of a mortgage, the bank is extending credit directly to the mortgagee.

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While I do understand there should be some merchantability protection for the consumer, it seems to me that the merchant ALWAYS ends up paying for the broken dishes, not the banks, and almost never the consumer. This is by the way, after the merchant has already been pounded by some irrational "processing fee" by the credit card companies.
The merchant does have to pay a chargeback fee. But they are still absolutely free to collect directly from the consumer. If the chargeback was legitimate, the merchant *should* be out the money. If it's illegitimate, the consumer still owes them the money and they can still demand payment or sue the customer. That's the risk when you extend credit -- the recipient may not pay you and you might have to sue them.

At least in the United States, credit card chargebacks are nothing like ACH chargebacks. It's simply the bank electing not to collect the debt on behalf of the merchant because they are not convinced it's legitimate.

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March 09, 2012, 03:20:56 AM
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Joel,

When you pay your credit card's interest rate (APY) you pay it to the credit card company, not the merchant. That is because the credit card company is extending credit to you, and not the merchant. The merchant is agreeing to provide you with certain goods or services in exchange of a lump sum payment, in this case disbursed by the credit card company to the merchant on your behalf, just like a bank disburses a sum lump payment to the seller of a house at the closing on your behalf. There is NO credit extended by the merchant, unless you are paying the merchant with a credit card issued by the merchant (i.e. target credit card, etc).

With your logic, the seller of a house will be providing credit "in part" to the buyer, along with the bank when a mortgage is closed. Months later, if the buyer of the house quits paying, the bank will know on the sellers door and ask for the money back.

A "credit card" is an instrument by which the issuing institution extends credit to the customer, and for which collects interests payments, service fees, etc. The whole point for the merchant (in theory) is to delegate the issuing of credit and mitigate risk to a third party.

In any case, chargebacks have nothing to do with who extends credit. Chargebacks (be it ACH or Credit Cards) can occur for two reasons:

  • Fraud: The issuing institution determines that fraud has been committed, so takes back the money.
  • implied warranty of fitness for a particular purpose (Non performance, etc which is the norm in commerce in the USA and here in Canada) (http://en.wikipedia.org/wiki/Implied_warranty).

Quote
Right, that's because mortgages are not like credit cards. In the case of a mortgage, the bank is extending credit directly to the mortgagee.

This really have nothing to do to whom the bank is extending credit to, since in both cases the bank is extending credit to the buyer, not the merchant (or seller).

This has to do with the fact that Real Estate sells fall under Caveat Emptor (http://en.wikipedia.org/wiki/Caveat_emptor) i.e. "Buyer be aware". And this brings me to the next point: Before we created a race of retarded morons that can't seem to be able to educate themselves as consumers, the world's economy traded based on Caveat Emptor all the time. You couldn't go to a fucking Roman merchant and be "Can I like ... have my salt back, I am not really feeling this fur color with my skin ....". Yep we have shat all over darwin, and this is what we now have.

Let me give you an example on Real Estate: When you go buy a house you check it out, you hire a home inspector, you have by law 45 days to withdraw or modify your offer if defects are found, you do your research (most likely pay the title company to do it) on the house title, make sure it is free of liens, etc.. etc..

This is because after closing day, if you want your money back, well, guess what? you are jolly well fucked. This is thanks to Caveat Emptor.

Bitcoin works under the premises of Caveat Emptor. The banking world works under the premises of "I freeze your account whenever the fuck I want" and "I charge you back because the customer complained that the chia pet didn't grow grass" etc ... etc... etc...

Caveat Emptor has its downfalls of course, it is not a panacea, but honestly this situation with chargebacks (I have had chargeback requests for international wire transfers dating 6 months ago) is absolutely getting out of hand.

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March 09, 2012, 03:22:25 AM
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Joel,

When you pay your credit card's interest rate (APY) you pay it to the credit card company, not the merchant. That is because the credit card company is extending credit to you, and not the merchant. The merchant is agreeing to provide you with certain goods or services in exchange of a lump sum payment, in this case disbursed by the credit card company to the merchant on your behalf, just like a bank disburses a sum lump payment to the seller of a house at the closing on your behalf. There is NO credit extended by the merchant, unless you are paying the merchant with a credit card issued by the merchant (i.e. target credit card, etc).

With your logic, the seller of a house will be providing credit "in part" to the buyer, along with the bank when a mortgage is closed. Months later, if the buyer of the house quits paying, the bank will know on the sellers door and ask for the money back.

A "credit card" is an instrument by which the issuing institution extends credit to the customer, and for which collects interests payments, service fees, etc. The whole point for the merchant (in theory) is to delegate the issuing of credit and mitigate risk to a third party.

In any case, chargebacks have nothing to do with who extends credit. Chargebacks (be it ACH or Credit Cards) can occur for two reasons:

  • Fraud: The issuing institution determines that fraud has been committed, so takes back the money.
  • implied warranty of fitness for a particular purpose (Non performance, etc which is the norm in commerce in the USA and here in Canada) (http://en.wikipedia.org/wiki/Implied_warranty).

Quote
Right, that's because mortgages are not like credit cards. In the case of a mortgage, the bank is extending credit directly to the mortgagee.

This really have nothing to do to whom the bank is extending credit to, since in both cases the bank is extending credit to the buyer, not the merchant (or seller).

This has to do with the fact that Real Estate sells fall under Caveat Emptor (http://en.wikipedia.org/wiki/Caveat_emptor) i.e. "Buyer be aware". And this brings me to the next point: Before we created a race of retarded morons that can't seem to be able to educate themselves as consumers, the world's economy traded based on Caveat Emptor all the time. You couldn't go to a fucking Roman merchant and be "Can I like ... have my salt back, I am not really feeling this fur color with my skin ....". Yep we have shat all over darwin, and this is what we now have.

Let me give you an example on Real Estate: When you go buy a house you check it out, you hire a home inspector, you have by law 45 days to withdraw or modify your offer if defects are found, you do your research (most likely pay the title company to do it) on the house title, make sure it is free of liens, etc.. etc..

This is because after closing day, if you want your money back, well, guess what? you are jolly well fucked. This is thanks to Caveat Emptor.

Bitcoin works under the premises of Caveat Emptor. The banking world works under the premises of "I freeze your account whenever the fuck I want" and "I charge you back because the customer complained that the chia pet didn't grow grass" etc ... etc... etc...

Caveat Emptor has its downfalls of course, it is not a panacea, but honestly this situation with chargebacks (I have had chargeback requests for international wire transfers dating 6 months ago) is absolutely getting out of hand.

In a true libertarian free market society there is no room to baby the inept through life.


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March 09, 2012, 03:52:04 AM
 #100

When you pay your credit card's interest rate (APY) you pay it to the credit card company, not the merchant.
Right, which you start paying in 30 days or so.

Quote
That is because the credit card company is extending credit to you, and not the merchant.
Sure, at that point. But that's the non-chargeback case. That's not what happens if you reverse the charge.

Quote
The merchant is agreeing to provide you with certain goods or services in exchange of a lump sum payment, in this case disbursed by the credit card company to the merchant on your behalf, just like a bank disburses a sum lump payment to the seller of a house at the closing on your behalf. There is NO credit extended by the merchant, unless you are paying the merchant with a credit card issued by the merchant (i.e. target credit card, etc).
No, one is not "just like" the other. When you buy a house, the seller has *no* agreement with the mortgage company. The mortgage company just pays them. When you buy something with a credit card, there is a contractual arrangement between the merchant and the credit card issuer. These two situations are simply not comparable at all.

Quote
With your logic, the seller of a house will be providing credit "in part" to the buyer, along with the bank when a mortgage is closed. Months later, if the buyer of the house quits paying, the bank will know on the sellers door and ask for the money back.
I don't understand what you mean by "with my logic". These are two different factual situations. With a home mortgage, the mortgage company only pays the seller. With a credit card, the merchant has a contract with the bank that sets out a different relationship. This is a factual difference, it's not something you can logic out. You have to read the contracts to understand the relationship. (The contracts are not really freely negotiated though. The credit card issuer tells the merchant to take it or leave it, and Federal law sets out many of the requirements.)

Quote
A "credit card" is an instrument by which the issuing institution extends credit to the customer, and for which collects interests payments, service fees, etc. The whole point for the merchant (in theory) is to delegate the issuing of credit and mitigate risk to a third party.
To mitigate long-term risk, but not short-term risk. And to avoid having to do credit inquiries and avoid having to meet other requirements. Nevertheless, the bank's agreement with the merchant permits them to refuse to collect from the consumer on behalf of the merchant. A merchant cannot use a credit card issuer to protect themselves from the risks associated with their own non-performance and the consumer need not sue the merchant if they have not yet made payment. That's what the contracts between the merchant and the credit card issuer say.

Quote
This really have nothing to do to whom the bank is extending credit to, since in both cases the bank is extending credit to the buyer, not the merchant (or seller).
No, the bank is extending credit to the merchant in the case of a credit card. Why do you think credit card companies bother to investigate merchants or closing down merchant accounts for fraud? The credit card company is collecting the principle on behalf of the merchant and if you do not owe the merchant the principle, you do not owe it to the credit card company. That is the way credit cards work, at least in the United States.

By the way, in the vast majority of cases, this really does benefit the merchants. Very few people would buy a camera from an online store if they had to investigate the camera and the store the way you have to investigate a real estate purchase. And, of course, the credit card issuers don't make much money if consumers are afraid to use their credit cards.

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March 09, 2012, 04:31:24 AM
 #101

When you pay your credit card's interest rate (APY) you pay it to the credit card company, not the merchant.
Right, which you start paying in 30 days or so.

Quote
That is because the credit card company is extending credit to you, and not the merchant.
Sure, at that point. But that's the non-chargeback case. That's not what happens if you reverse the charge.

Quote
The merchant is agreeing to provide you with certain goods or services in exchange of a lump sum payment, in this case disbursed by the credit card company to the merchant on your behalf, just like a bank disburses a sum lump payment to the seller of a house at the closing on your behalf. There is NO credit extended by the merchant, unless you are paying the merchant with a credit card issued by the merchant (i.e. target credit card, etc).
No, one is not "just like" the other. When you buy a house, the seller has *no* agreement with the mortgage company. The mortgage company just pays them. When you buy something with a credit card, there is a contractual arrangement between the merchant and the credit card issuer. These two situations are simply not comparable at all.

Quote
With your logic, the seller of a house will be providing credit "in part" to the buyer, along with the bank when a mortgage is closed. Months later, if the buyer of the house quits paying, the bank will know on the sellers door and ask for the money back.
I don't understand what you mean by "with my logic". These are two different factual situations. With a home mortgage, the mortgage company only pays the seller. With a credit card, the merchant has a contract with the bank that sets out a different relationship. This is a factual difference, it's not something you can logic out. You have to read the contracts to understand the relationship. (The contracts are not really freely negotiated though. The credit card issuer tells the merchant to take it or leave it, and Federal law sets out many of the requirements.)

Quote
A "credit card" is an instrument by which the issuing institution extends credit to the customer, and for which collects interests payments, service fees, etc. The whole point for the merchant (in theory) is to delegate the issuing of credit and mitigate risk to a third party.
To mitigate long-term risk, but not short-term risk. And to avoid having to do credit inquiries and avoid having to meet other requirements. Nevertheless, the bank's agreement with the merchant permits them to refuse to collect from the consumer on behalf of the merchant. A merchant cannot use a credit card issuer to protect themselves from the risks associated with their own non-performance and the consumer need not sue the merchant if they have not yet made payment. That's what the contracts between the merchant and the credit card issuer say.

Quote
This really have nothing to do to whom the bank is extending credit to, since in both cases the bank is extending credit to the buyer, not the merchant (or seller).
No, the bank is extending credit to the merchant in the case of a credit card. Why do you think credit card companies bother to investigate merchants or closing down merchant accounts for fraud? The credit card company is collecting the principle on behalf of the merchant and if you do not owe the merchant the principle, you do not owe it to the credit card company. That is the way credit cards work, at least in the United States.

By the way, in the vast majority of cases, this really does benefit the merchants. Very few people would buy a camera from an online store if they had to investigate the camera and the store the way you have to investigate a real estate purchase. And, of course, the credit card issuers don't make much money if consumers are afraid to use their credit cards.

Excellent explanation.

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March 09, 2012, 04:56:39 AM
 #102

Dwolla claims they don't need licenses, as they use The Members Group to middle man the ACH payments:

Quote
Well it was legal, we just couldn't operate outside of Iowa. For the first two years we built out the platform. We did a sh*tload of testing on a small scale because legally we couldn't launch Dwolla nationwide. We spent two years inside of Iowa fine-tuning Dwolla with the financial institutions, building out some of the initial models, and trying to figure out how to legally do what we do.

How'd you find a legal loophole?

Moving money is an exceptionally regulated business. We're in Iowa, which is sort of conservative — I don't know if that helped us or hurt us, but in the long term I think it helped us. We figured to do this legally, we had two options: we could take in a tremendous amount of money and go out and get licenses, which is how most people do it. But we didn't have access to that kind of capital here.

The other option was to bring in really strategic investors, which is what we did. One of our investors is a financial institution; one is a financial services company.

Our investors do credit and debit processing for banks. So when you get a credit card from your bank, it's being issued by companies like them. Our investors are also distributing our product to financial institutions. So we've been building a payment network, and we can do it legally because of who our investors are.





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April 07, 2012, 10:13:55 AM
 #103

I've experienced weird things like one time my account was -$20 when I withdrew $20 so I emailed them many times and their response where that i owed them money, and I explained that they owed me money and that I thought this was ridicules since dwolla claims you can't go negative. Anyways 5 to 7 emails later and a three-way phone call connection with my bank to verify my information I finally got a zero balance and when I claimed they owed me 20 dollars still they said they need to look back at my statements, Well my written records said they owed me $20 but when i looked back at the statement listing it added up.... I originally thought I just wrote down my transactions wrong but this recent tradehill stuff makes wonder if they gipped me $20...Scumbags
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November 29, 2013, 01:31:26 AM
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Has anyone actually pulled the court documents off of Pacer?  I would like to read just the original complaint and answer to the complaint by the named parties.  I'm guessing that since they haven't been very vocal about this they are just settling out of court.

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December 19, 2013, 09:15:16 AM
 #105

Many thoughts running through my mind after reading this. Considering shorting BTC. Dwolla probably relies a lot on Bitcoin-related businesses for revenue, but all the trouble they're having might push them toward dumping all Bitcoin-businesses as Paxum did instead of fixing their problems. Dwolla's a pretty small start-up... Hopefully they can't afford to dis-associate from Bitcoin. I know a LOT of people who use Dwolla. It's pretty darn close to free for US citizens to get cash into an exchange, and it's the only method I've ever used to transfer money into an exchange. So close to seeing a sustained push through $5, too. Hmm.
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