UPDATED: PayPal Corrects Error With GlassUp Funding Via Indiegogo

paypalUPDATE: PayPal has admitted an error was made with GlassUp’s account and has released the following statement clarifying the situation…

We looked into what was happening with GlassUp and corrected the situation earlier today. GlassUp now has access to all of the funds that they’ve raised on Indiegogo through PayPal. We think they are developing a fascinating product and don’t want to impede their innovation in any way.

Francesco Giartosio of GlassUp said in an email to Crowdfund Insider that the situation has been rectified. He explains that he didn’t know PayPal could withhold funds like they did, but they clarified that clause 10.4 enables them to do so. He had received a contact from Indiegogo yesterday asking him to “be patient” as they worked with PayPal to rectify the situation. He had this to say regarding the effect on his campaign…

“Backers have been incredibly supportive, and now the issue is over, so they don’t need to do anything any more.  I have already reallowed the payment via Paypal on our campaign page.  I’ll just have to manually manage all the backers who wish to still take advantage of the early bird offer they had subscribed to, because I can not reopen it selectively.”

The original article is below…

In a backer update, GlassUp project creator Francesco Giartosio explains that PayPal is holding funds raised through their payment solution until GlassUp can deliver to backers. The post is as follows…

Hallo everyone,

this is to inform you that we have to reimburse all payments made via Paypal, since the beginning of the campaign. The reason is that Paypal would release the funds to us only after the glasses are delivered, which obviously is totally useless for our crowdfunding.

The reimbursed backers can pay again via credit card, if they wish. Those who had selected an early bird offer will not find it any more, and we can not reopen the early bird offer selectively. The only option to still take advantage of the early bird offer is to send $ 199 as a donation, and we will manually match these “donations” to the reimbursed Paypal payments, and send you the glasses. What a flipping mess, thank you Paypal.

Here is the whole story. Near the end of our GlassUp campaign on IndieGoGo, Paypal blocked our account, seeing so much cash come in. They did not alert us in advance, nor did they notify us after having done it! After a few days, we found it out because a backer on IndieGoGo was kind enough to inform us that his payment through Paypal was not working. So we accessed our account, and found it was blocked. This already upset us quite a bit, we consider it to be an offensive way to treat your customers (or anyone else). Also considering that we had done nothing wrong, except having a particularly successful campaign. We don’t treat our customers this way.

On our Paypal account, we found a request for more information, that we sent in. Then we got a long list of questions, that we answered. At the end, we were informed that the account had become Limited: we could now receive payments, but not collect the money. We would have received the money only after delivering the product, in 2014.

indiegogo-logo1We complained that this goes against the whole concept of crowdfunding, that such money was bound to fund our project. Paypal answered that we would have been allowed a little part of the total amount, but only after having paid the bills related to the production of the eyeglasses.

So we finally had to renounce. It is obviously useless to get the funding after you have delivered the product. We are now reimbursing all payments made through Paypal, and we still don’t know if IndieGoGo will reimburse us the relevant commissions. Fortunately, we have now collected enough money to cover those costs and the rest of the project.

For any clarifications you’re welcome to contact me at [email protected]

Francesco Giartosio.

This may present a concern for project creators that are seeking funding for hardware projects on Indiegogo. We all know that these types of projects regularly rely on the funds from the crowd for delivery and fulfillment. Not having access to these funds presents a risk not only to the project creators, but to the over 400 backers that have participated in the campaign to date.

Of course, it all depends on the reasoning behind the held funds. The question is whether PayPal has some indication of fraudulent activity or if they’re just withholding funds for all campaigns of this type. The former is understandable, but the latter would have wide-ranging implications across the Indiegogo platform.

GlassUp has raised just short of $100,000 with 8 days left in the campaign. We previously reported on the Google Glass competitor here.

We’ve reached out to Indiegogo, PayPal and Mr. Giartosio for comment and will update with more information as it becomes available.

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