Original URL: http://www.theregister.co.uk/2014/07/01/paypal_unfreezes_funds_for_protonmail_encrypted_email_startup/

PayPal says sorry: Fat fingers froze fundraiser for anti-spy ProtonMail

Payment goliath blames 'technical problem' for account block

By Iain Thomson

Posted in Security, 1st July 2014 19:45 GMT

PayPal has lifted its embargo on ProtonMail, the Swiss startup raising funds via Indiegogo to build a communications system hardened against surveillance.

The payment giant claims the account freeze wasn't a matter of policy, but a simple cock-up.

On Monday ProtonMail, which was set up by boffins at CERN and MIT, reported that PayPal had blocked its account and left $280,000 of crowd-funded cash in limbo. ProtonMail said PayPal hadn't warned it of the account freeze, and a representative of the payment service provider had questioned whether the proposed service was legal and had government approval.

But within 24 hours ProtonMail reported that the block had been lifted and it had access to the funds pledged by its supporters once more. Anuj Nayar, senior director of global initiatives at PayPal, told The Register that the whole furor had been caused by a couple of errors on its part.

Back in September PayPal changed its operating procedures on administrating account status in response to problems some of its customers had been having, he said. ProtonMail's account was flagged up for checking – a process that would have left the startup with full control of their funds – but someone pressed the wrong button and frozen the account, we're told.

"We made a mistake and as soon as we found out we called and apologized," Nayar said.

With regards to the conversation with a PayPal staffer that ProtonMail reported about the service's legality, PayPal said it is checking call transcripts, but that it was clear that someone at their end had made a mistake.

There is nothing in ProtonMail's proposals that broke PayPal's rules and that it has no problem with this kind of product, Nayar said. Indeed, there are plenty of products funded via PayPal in the security and encryption worlds.

Nayar added that senior executives will review procedures to make sure this doesn't happen again. We'll keep you posted. ®