PayPal Facing a Lawsuit Freezing Customer Accounts and Funds

Three PayPal users whose accounts were allegedly frozen and money was taken by the company without explanation have filed a federal lawsuit against the online payment service. The plaintiffs — two California users and one Chicago — accuse the company of unlawfully seizing their personal property and violating extortion laws. They are now proposing a class action lawsuit on behalf of all other users whose accounts have been frozen before and are seeking damages, in addition to punitive and exemplary damages.

Lena Evans, a plaintiff who has been using PayPal for 22 years, said the site seized $26,984 from her account six months after it was frozen without ever telling her why. Evans has been using PayPal to buy and sell clothes on eBay, to exchange money for a poker league she owned and for a non-profit that helps women with different needs.

Prosecutor Ronnie Shemtov said PayPal confiscated more than $42,000 of her money and was not given an acceptable reason to close her account. She received several different explanations when I contacted the company: One customer reps said it was because it used the same IP address and computer as other Paypal users, while another said it was because it sold yoga clothes 20 to 30 percent less than retail. However, another actress allegedly said it was because she used multiple accounts, which she denies.

Shabadan Akilbekov, the third plaintiff, said PayPal confiscated more than $172,000 of his money without giving him any explanation as to why the account was restricted in the first place. Akelbekov used a company account owned by his wife to sell Hyaluron Pens, which are needle-free pens that inject hyaluronic acid into the skin. After funds disappeared from the account after a six-month freeze, PayPal allegedly sent his wife a letter saying that she “violated PayPal’s User Agreement and Acceptable Use Policy (AUP) by accepting payments for the sale of injectable fillers that were not approved by the FDA.” It also said that funds were taken from her account “for liquidated damages resulting from violations of this UDRP in accordance with the user agreement.”

PayPal has long angered many users by having their accounts restricted and their funds frozen for six months or more. One notable case was American poker player Chris Moneymaker who took $12,000 from his account after six months of being tied up. The money maker was already in the process of asking people to join him in a class action before he “mysteriously got his money back.”

Part of the complaint reads:

“Plaintiffs are bringing this class action action against Defendant PAYPAL, INC. (“PayPal”) to recover damages and other remedies available by law and equity on behalf of themselves, as well as on behalf of members of the class identified herein… This action stems from the widespread business practices that The defendant pursued it by unilaterally seizing funds from the financial accounts of its clients, without cause and without any fair or legal process.

PayPal places a “hold” on the claimants’ money in their PayPal accounts. PayPal failed to inform the plaintiffs and class members of the reason(s) for the actions taken by PayPal, even telling the plaintiffs and class members that they would have to “obtain a subpoena” to find out the simple information why PayPal was holding and preventing the plaintiffs from accessing their own funds.

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