Press Release - TradeHill, Inc. Files Suit Against Dwolla, Inc.

[JoelKatz]

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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[Matthew N. Wright]

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.

[jimbobway]

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.

[Matthew N. Wright]

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.

[jimbobway]

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.

[Matthew N. Wright]

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.

[finway]

2M $, great!

[RaggedMonk]

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. 

[RaggedMonk]

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.

[kjj]

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

Discovery

[RandyFolds]

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...

[jimbobway]

I can no longer access the Dwolla TOS:

https://www.dwolla.com/​tos

[MPOE-PR]

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.

[RandyFolds]

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!

[jimbobway]

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.

[Kluge]

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"

[repentance]

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.

[Aggro]

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.

[Aggro]

... "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.

[Matthew N. Wright]

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

That source is a blog (with spelling mistakes).