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Skullgirls crowd-funding hits snag with PayPal

by Steve Watts, Apr 23, 2013 9:30am PDT

You may have heard that Skullgirls had a remarkably successful crowd-funding campaign recently. The next step is for Lab Zero Games to actually get that money so it can start development on all the precious goodies that fans funded, and it's hit a snag on that front.

Develop reports that PayPal froze the account, citing concerns that fans who voted for characters who didn't make it might ask for a "chargeback." Of the $829,000 raised, PayPal could be on the hook for up to $700,000 if enough backers did that. Lab Zero CEO Peter Bartholow said he filed a complaint with the Consumer Financial Protection Bureau, after sending PayPal the requested documentation. PayPal has unfrozen the account, but is holding $35,000 as collateral.

PayPal asked if the studio could pay the money itself if customers asked for chargebacks. "I said 'no,' because, well... we're not?," Bartholow wrote on NeoGAF. "The whole point of crowdfunding is to give us the money to develop stuff, not take out a loan."

He did say "their logic sort of makes sense," and that he understands why the company would feel edgy taking on the risk. "If we spend all the money and don't deliver and everyone [wants] chargebacks, PayPal is concerned they will be on the line for it," he wrote. "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.'"

Some card holders can retain the right to ask for chargebacks for up to a year, but Bartholow says Lab Zero will begin production now rather than wait for the danger to pass.





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