PayPal Stonewalls Charitable Deadspin Effort

    January 11, 2007
    WebProNews Staff

The editor and participants at the lively sports blog Deadspin attempted to establish a fund to benefit the family and platoon of Adam Knox, who died in the service of his country.

What Deadspin’s Will Leitch has found is a tremendous roadblock in the form of eBay’s lucrative payment processing arm, PayPal. The establishment of and subsequent donations to the Adam Knox Fund have been trapped in a morass of legalese and confusion on PayPal’s part.

The frustration boiled over this week, as illustrated in a post on Deadspin about the delays:

When we set up the fund, we attached it to a Paypal account, because we thought that would make it easier to contribute. Turns out, though — as we learned through two more hours on the phone with these jerks yesterday — that they set up the initial Paypal account as a “charitable organization” account. (We do not know why they did this. We did not ask them to.)

Because of this, they require “documentation of non-profit tax-exempt status.” Because Deadspin is not, in fact, a non-profit organization (though we wouldn’t exactly call us a “profit” organization either), the compliance department has decided that the funds are to be frozen for “180 days,” after which time they will be deposited in the “bank account on file.” (Which is our personal bank account.)

It isn’t the first time PayPal has taken a legitimate effort to help others and squeezed off an account. During the aftermath of Hurricane Katrina, the owner of attempted to help by accepting donations for the Red Cross by donating funds through his site via PayPal.

As noted, PayPal locked the account, citing fraud concerns as the reason.

Direct donations to the Red Cross would have avoided that issue. But a purely grass roots effort, one that PayPal benefited from through the fees it charges per transaction, has hindered an attempt to bring a modicum of goodwill to the people most directly impacted by the fall of a soldier.

Judging by the numerous comments on Deadspin regarding PayPal’s actions, the payment processor doesn’t have many pals on that sports blog right now.

UPDATE!: Deadspin now says the PayPal problem has been resolved, and the charitable funds have been released for their intended use.


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David Utter is a staff writer for WebProNews covering technology and business.