PayPal Faces Federal Lawsuit For Freezing Customer Accounts, Funds

Online payment service, PayPal will face a federal lawsuit filed by three users who alleged that their account and funds were frozen without any explanation.

The plaintiffs are two users from California and one from Chicago. They accuse the company of unlawfully seizing their personal property and violating racketeering laws and propose a class-action lawsuit on behalf of all other users who've had their accounts frozen before and are seeking restitution, as well as punitive and exemplary damages.

One of the plaintiffs, Lena Evans who'd been a PayPal user for 22 years, said the website seized $26,984 from her account six months after it got frozen without ever telling her why. Evans had been using PayPal to buy and sell clothing on eBay, to exchange money for a poker league she owns and for a non-profit that helps women with various needs.

Fellow plaintiff Roni Shemtov said that PayPal seized over $42,000 of her money and never got an acceptable reason for why her account was terminated. She received several different explanations when she contacted the company: One customer rep said it was because she used the same IP and computer as other Paypal users, while another said it was because she sold yoga clothing at 20 to 30 percent lower than retail. Yet another representative allegedly said it was because she used multiple accounts, which she denies.

Shbadan Akylbekov, the third plaintiff, said PayPal seized over $172,000 of his money without giving him any explanation why the account got limited in the first place. Akylbekov used the account of a company his wife owns to sell Hyaluron pens, which are needle-less pens that inject hyaluronic acid into the skin. After the money disappeared from the account following a six-month freeze, PayPal allegedly sent his wife a letter that says she "violated PayPal's User Agreement and Acceptable Use Policy (AUP) by accepting payments for the sale of injectable fillers not approved by the FDA." It also said that the money was taken from her account "for its liquidated damages arising from those AUP violations pursuant to the User Agreement."

One high-profile case for limiting users' accounts and freezing their funds was American poker player Chris Moneymaker's who had $12,000 taken from his account after six months of being limited. Moneymaker was already in the process of asking people to join him in a class-action lawsuit before his funds were "mysteriously returned."

Part of the complaint reads:

"Plaintiffs bring this class action against Defendant PAYPAL, INC. ("PayPal") to recover damages and other relief available at law and in equity on behalf of themselves, as well as on behalf of the members of the class defined herein... This action stems from Defendant’s widespread business practice of unilaterally seizing funds from its clients’ financial accounts, without cause and without any fair or due process,”

“PayPal places a "hold" on Plaintiffs' own funds in their own PayPal accounts. PayPal has failed to inform Plaintiffs and members of the class of the reason(s) for the actions PayPal has taken, even telling Plaintiffs and members of the class that they will "have to get a subpoena" to learn the simple information as to why PayPal was holding, and denying Plaintiffs, access to their own money."