PayPal froze Skullgirls IndieGoGo funding

Developer Lab Zero Games had to overcome payment firm PayPal to keep development of Skullgirls on track.

The game was the subject of a successful crowdfunding campaign on IndieGoGo, raising just under $830k last month.

However, PayPal froze the studio’s account and threatened to keep it locked unless it received assurances that the developers had a financial fallback should existing backers decide to drop out.

Paypal’s freeze on our account is making it so that I can’t pay people today,” Lab Zero chief executive officer Peter Batholow said according to VentureBeat. I am pretty fucking pissed. I sent them all the documentation they asked for last night, hoping it would be resolved today, but didn’t hear anything back.”

I think it’s sketchy, but their logic sort of makes sense. Basically, they are terrified of chargebacks. If we spend all the money and don’t deliver and everyone [requests] chargebacks, PayPal is concerned they will be on the line for [the money].

So, they are effectively treating it as a loan. I mean, the guy flat out said: ‘Until the threat of chargebacks has passed, PayPal is effectively financing your development’.

"They also asked if we’re good for the $700,000 if something goes wrong. I said ‘no’, because, well we’re not? The whole point of crowdfunding is to give us the money to develop stuff, not take out a loan."

PayPal eventually unfroze the account but has retained $35,000 as collateral.