PayPal Sued for Freezing Customer Accounts Without Explanation
(Bloomberg) -- PayPal Holdings Inc., a popular digital payment platform, violated racketeering laws by freezing customer money and refusing to provide an explanation for the move, three account holders alleged in a federal lawsuit.
PayPal, which has an estimated 325 million account holders worldwide, put a hold of as long as six months on funds for alleged violations of its 65-page user agreement, according to the complaint filed Thursday in California.
Two California residents and a Chicago businessman claim in the lawsuit that PayPal’s hold on the money amounts to an unlawful seizure. The three plaintiffs are proposing a class-action lawsuit on behalf of all account holders who have had their money placed on hold.
“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,” the account holders said.
The company’s practice has drawn the ire of some well-known users, including Chris Moneymaker, the winner of the 2003 World Series of Poker, who had threatened to sue after he said PayPal placed a hold on $12,000 of his money.
Less than 10 days after tweeting the threat, PayPal “mysteriously returned his money” so Moneymaker couldn’t be used as the main plaintiff in the current lawsuit, said Eric Bensamochan, the lawyer for the people who sued Thursday.
PayPal didn’t immediately respond to an emailed request for comment.
Among the claims in the lawsuit, PayPal is accused of committing conversion -- the act of dominion wrongfully exerted over the personal property of another -- of civil violations of federal racketeer influenced and corrupt organizations act (RICO), breach of contract and unjust enrichment.
The plaintiffs are seeking restitution and unspecified punitive and exemplary damages.
The case is Evans v. PayPal Inc., 5:22-cv-248, U.S. District Court, Northern District of California.
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