Community Pressure Pushes PayPal to Unfreeze Diaspora*'s Account

PayPal unfroze open-source social network Diaspora*'s account after locking the open-source social network away from more than $45K worth of donations for nearly a week.

"Free at Last: Thanks to your tweets & emails, PayPal has freed the Diaspora* community's donations!" Diaspora* tweeted.

PayPal confirmed that it had released the frozen account via tweet.

 UPDATE: Yosem Companys of Diaspora* tells LAUNCH that PayPal emailed Diaspora* to inform them that they had made the decision to reopen their account and that a little later a PayPal executive repeatedly called the startup and apologized profusely. Despite PayPal's actions, Yosem says that Diaspora* will maintain its account with the payment company. 

The company has also posted a statement on its blog here

The whole ordeal began after Diaspora* reached out to its members for donations on Oct. 12 to keep the project alive. The company quickly received more than $45K in donations. Diaspora* learned that its account had been frozen when they initiated a fund transfer on Oct. 13 and were denied.

PayPal told Diaspora* that it needed more documentation on the company, including its certificate of incorporation, which it then provided. Despite fulfilling these requests on Tuesday, PayPal told Diaspora its account would be placed on a 180-day hold and could not accept new donations.

But a few hours after PayPal froze the company's account, payment startup Stripe stepped in and created an account for Diaspora* to receive donations -- a standard practice according to John Collison, Stripe co-founder tells LAUNCH.

"When PayPal mysteriously and arbitrarily decided to freeze everyone’s donations, we reached out to various payment services. Stripe responded right away to our call for help and swung into action, helping us get our online donations capability back up and running in just a few hours," a Yosem Companys writes on the Diaspora* blog.

UPDATE: "Stripe reaching out to help us goes to show that Silicon Valley is not just a cluster of companies, as many people think, but rather a caring and nurturing community, where we all work together to make change happen," Yosem tells LAUNCH via email. "Startup entrepreneurs -- especially social entrepreneurs like us -- stick together because we know that we're facing what on the surface appear to be insurmountable odds. But by working together, we make those insurmountable odds easily surmountable."

Stripe, a payment service founded by brothers John Collison and Patrick Collison in January 2011, received $2M in funding from an impressive investor list that includes PayPal founders Peter Thiel and Elon Musk. Thiel and Musk sold PayPal to eBay in 2002 for $1.5B. 

"We can't comment on PayPal's actions or our relationship with specific customers," John tells LAUNCH via email. "We're just happy that Diaspora were able to get set up quickly with something that worked for them."

Additionally, Yosem says that Dwolla and WePay also reached out to help Diaspora* when PayPal froze their account. 



Twitter: @joindiaspora

Twitter: @PayPal  

Twitter: @stripe  

John Collison, Co-founder
Twitter: @collision  

Patrick Collison, Co-founder
Twitter: @patrickc