Thanks to a post on Quora,
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http://www.quora.com/What-is-the-difference-between-paypal-and-dwolla/answer/Sam-Ohara/comment/993142I've learned that Dwolla's terms of service have changed in another area as well, unfortunately:
(4) Funds in the Veridian Holding Account are held in a pooled account. THESE FUNDS ARE NOT ELIGIBLE FOR INDIVIDUAL INSURANCE, AND MAY NOT BE ELIGIBLE FOR SHARE INSURANCE BY THE NATIONAL CREDIT UNION SHARE INSURANCE FUND.
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https://www.dwolla.com/tosI hope I am understanding this correctly.
This means that, just like with MF Global, if the CEO orders your funds to be applied for use in whatever manner of his choosing, regardless of whether or not that action was legal, individual account holders have no guaranteed access to those funds.
This is unlike PayPal, which uses pooled accounts with FDIC pass-through protection (up to $100K USD per account):
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https://www.paypal.com/cgi-bin/webscr?cmd=p/gen/fdic-outsideIn other words, don't park your funds at Dwolla like you would at a bank.
I'm reading it as the funds not being individually covered by insurance because Dwolla users are not members of Veridian. When you open a credit union account you're usually required to buy a token amount of shares to become a member - which makes your funds eligible for share insurance. Even though Veridian is an investor in Dwolla, Dwolla users are not members of the credit union itself and it's therefore unlikely that their funds would be covered by share insurance. Dwolla would be the "member" in this case and the funds in its Veridian account may or may not be eligible for insurance.
It looks like the
maximum amount for which a member account at a given credit union is insured is $250,000.
The passage of the Emergency Economic Stabilization Act of 2008 increased the amount of covered shares to $250,000 until the end of 2013.[7] This increase was made permanent by the Dodd–Frank Wall Street Reform and Consumer Protection Act in July 2010.[8]
NCUA insurance covers "member share accounts and deposits":
Share draft accounts (aka "checking accounts").
Share savings that can be added to or withdrawn from at any time.
"Money market share" accounts, essentially high-interest share savings accounts (the name is similar to "money market funds" which are not insured).
Share certificates (CDs), which generally require funds be kept in the account for a set period.
Outstanding Cashier's Checks, Interest Checks, and other negotiable instruments drawn on the accounts of the credit union.
