Last summer Polish developer and Wikidot CEO Michal Frackowiak launched Streamza, a torrent download service that lets users stream music and movies securely to their PC, TV, iPhone or iPad. Streamza has been growing steadily ever since and welcomes thousands of new users each month.

Earlier this week, however, the developer was presented with some bad news. Without prior warning, PayPal stopped providing payment services to Streamza and limited the associated account. That also means that all funds have been frozen for the time being.

“They emailed to inform me that my PayPal account had been reviewed and that Streamza does not comply with their policies. My account became ‘limited’ until I removed PayPal from checkout and agreed to their policies, which I did immediately,” Michal informs TF.

The PayPal ban is a major setback for Streamza, as it will no longer be able to process new and recurring membership fees from premium subscribers. At the time of writing the PayPal account is still locked, and Michal hasn’t heard from PayPal after the initial email.

As usual, PayPal remains vague about the precise reason for the ban. The payment provider mentioned that Streamza violated their Acceptable Use Policy, which suggests that PayPal is concerned about possible infringing uses of Streamza.

PayPal’s policies don’t allow “infringing” services to accept payments. In addition, the company requires file-sharing services to be pre-approved.

“Service Requiring Pre-Approval: Offering online dating services; providing file sharing services or access to newsgroups; or selling alcoholic beverages,” PayPal’s AUP reads.

This approvals process requires services to agree to a list of strict terms and conditions. As can be seen below, this includes full disclosure of the processes that are in place to deter piracy, and allowing PayPal to actively monitor their service for copyright infringements.

PayPal’s Terms

While Streamza doesn’t promote copyright infringement in any way, it could be used to download or stream pirated files, much like any other streaming or download services including YouTube. Michal believes, however, that the payment provider is more strict with smaller players.

“When looking at these policies I wonder how the hell Mega.co.nz can work with PayPal. Somehow I am not that surprised: rules between two bigger players can be different from between a bigger player and a smaller one,” Michal tells TF.

Technically, PayPal may have the right to cut off Streamza under its policies, but it would have been appropriate to send an early warning. Over the past few days the service could only accept payments via Bitcoin, which is hurting business.

Due to personal circumstances Michal had plans to auction off Streamza, and the PayPal issue is the straw that broke the camel’s back. He is accepting bids on Flippa and hopes someone is willing to take over the service, to keep the 34,000 registered users happy.

“I believe that after half a year of running Streamza I created something cool. A project that some people love. It’s not only a great tech and user interface, but a service that fills a niche,” Michal says.

“Personally I hope someone smart can take it from here. It’s a really good piece of tech and a project that has its fans.”

Update: A few hours after publication Michal heard back from PayPal. He can enter the pre-approval process to accept payments for file sharing. This means that Streamza has to comply with the terms listed above. Until this process is completed Streamza can’t process PayPal payments, but the other account restrictions have been lifted.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

PayPal has stopped providing payment services to the Swedish based VPN provider iPredator. In addition, all the organization’s funds have been frozen. iPredator is commonly known as the “Pirate Bay” VPN as it was launched by the old Pirate Bay crew in 2009, but it’s currently operated by an independent non-profit foundation.

Ipredator and Pirate Bay founder Peter Sunde informs TorrentFreak that this disconnection came without prior warning and with no explanation from PayPal as to why the organization is no longer allowed to accept payments. PayPal simply stated that there is “an issue with the account.”

For Sunde and his team the disconnection comes at an unfortunate time. Just three weeks ago iPredator was also kicked out by its credit card payment processor Payson, who changed their terms of services and disallowed VPNs. Sunde believes that the two incidents are related.

“It’s not a coincidence that we are banned from Payson, and then PayPal a few weeks after,” he told TorrentFreak.

The iPredator team has tried to contact PayPal to get more information on the reason for the disconnection, but thus far without luck. The VPN provider still has to find a replacement for Payson as well, but to date have been unsuccessful.

Worryingly, one large European payment processor informed iPredator that they have been put on a blacklist of services that are not allowed to accept credit card payments.

“One processor we talked with, to replace Payson, told us that we were on a blacklist of services that are prohibited to accept credit cards. This apparently happened shortly after Payson announced it could no longer process MasterCard and Visa payments for VPN providers,” Sunde explains.

TorrentFreak has asked both MasterCard and Visa about the claims of an operational blacklist, but both companies denied one exists. However, Sunde believes that they are covering something up.

“It’s a sad day for democracy when third parties interfere with legal business, and then lie about it. This is typically something we hope someone leaks so we can see what they are morally censoring,” he adds.

Mastercard’s Senior Vice President of External Communications, Andrew Bowins, further said that they have no policy to ban VPN services, but that they occasionally disconnect merchants who violate their terms.

“We don’t currently have a policy that unilaterally prohibits VPNs or anonymizers. That said, in order to protect the integrity of the payment system and its participants, we do review merchants to determine whether their models are in compliance with our rules,” Bowins told TorrentFreak.

Neither MasterCard nor Visa could confirm that iPredator was allowed to process credit card payments. Several other payment processors and acquiring banks we contacted regarding the matter did not reply, and PayPal has offered no explanation for their decision either.

For Sunde and the rest of the iPredator team it’s this vagueness and lack of transparency that’s most frustrating. If they are for some reason banned, they would like to know on what grounds.

“If someone SAYS what it is, we can at least argue about it. With the enormous power they have accumulated, they are required to offer some transparency and responsibility,” Sunde tells us.

Without a response from PayPal we can only guess why iPredator is banned. Perhaps it’s their affiliation with the Pirate Bay, the fact that they operate a proxy, or because VPNs are starting to become tricky business. Truth is, we just don’t know.

Meanwhile, iPredator is now forced to go to the “dark corners” of the internet to find payment providers who are still willing to work with them. The VPN provider still has a few payment options left, including Bitcoin, and they hope that the public are willing to support them in during these tough times.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

PayPal has stopped providing service to the Germany based VPN provider GT Guard. In addition, all the company’s funds have been frozen.

GT Guard is a relatively small provider with about 450 active users, 90% of whom pay through PayPal. The company targets BitTorrent users who use the VPN and proxy service to download anonymously while bypassing throttling Internet providers.

GT Guard’s owner Mike was taken by surprise by PayPal’s decision as he is merely providing an anonymizing service to his customers. Initially PayPal stated that GT Guard violated the terms of service because it linked to adult sites but later on its affiliation with BitTorrent became a problem.

In an email received yesterday, PayPal’s Brand Risk Management department explains that “file-sharing, BitTorrent and Usenet websites, as well as similar services, require prior approval from PayPal.”

This policy has been in force since last year and has resulted in PayPal banning many file-sharing related services. However, the same strict demands generally don’t apply to a VPN provider.

During a previous phone conversation GT Guard explained to the payment processor that they were merely offering security services. In addition, the VPN/proxy provider also offered PayPal full access to the VPN and proxy. However, none of the above changed PayPal’s position.

GT Guard’s owner tells TorrentFreak that he would like to continue the service but that payment issues will most likely result in an exodus of customers.

This is not the first time that PayPal has gone after a BitTorrent-friendly VPN provider. Last year TorGuard was also banned but after a careful review PayPal decided that this was a mistake and eventually restored service.

Whether the action against GT Guard represents the early stages of a new crackdown on privacy services or is simply an isolated incident remains to be seen.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Rightsholders and anti-piracy companies have been putting companies like PayPal under increasing pressure to stop processing funds for sites that have become associated with copyright-infringing activities, whether those sites operate legitimately or not.

Stirred up by people such as those behind the StopFileLockers campaign and rightsholders including IFPI and BREIN for example, slowly but surely processors have been making it more and more difficult for file-sharing related sites to do business with them.

Many sites have had their funds frozen by PayPal – in some cases tens of thousands of dollars – after the company either arbitrarily decided to cease trading with them or after sites refused to comply with PayPal’s terms and conditions.

As previously revealed, PayPal has been demanding access to the back-end of file-hosting websites to examine their customers’ files as a condition of continuing business with them. That demand went too far for file-hoster PutLocker who told us last year that as a matter of confidentiality that would never happen. As a result PayPal froze the company’s funds for 6 months.

But PayPal isn’t stopping there. According to several admins who spoke with TorrentFreak on condition of anonymity, PayPal has been freezing the accounts of private BitTorrent trackers too – and then demanding access to the sites so they can see what goes on there.

Of course, this creates problems. Private sites tend to have invitation systems so in the first instance PayPal has to be either sent an invite or have an account created for them manually. However, once PayPal gains access it is effectively game over for the site’s donation account. There are few private trackers that deal in 100% authorized content and filtering out unauthorized material as PayPal requires would make many of them pointless.

We aren’t sure of the precise numbers but sites have definitely been losing their PayPal accounts in recent months, either after refusing to comply with PayPal’s terms or failing inspections. However, we are informed that there are ways of being creative in order to keep accounts – or at least develop new ones that run in a different direction.

One admin told us that he has plans to shift away from the donation model completely and towards selling products and services to his userbase. At an inflated price (a mug for $25 or VPN for $20 per month etc) he hopes that he can generate enough profit to keep his ship afloat.

“Paraphrasing that dude in Independence Day, do you really think it costs $20,000 for a toilet seat?” he said.

Another source told us he may well run two sites. One will operate as a fully legitimate concern within PayPal’s guidelines and be set up to accept the donations. These funds will then be funneled to the second site to keep it going.

There is another way of keeping PayPal sweet too, but the method is apparently so secretive that our source refused to reveal many details. “Let’s just say if you do let the monkeys at PayPal into your site, passing doesn’t have to be hard if you do the prep work,” we were told.

But despite the creativity, others appear to be destined for no-man’s land. During the past few days TorrentBytes, one of Internet’s oldest private trackers, has announced that due to being unable to process payments it may well close down before the end of the month.

“Recent situations have put the staff team in a very hard position with handling site finances,” an announcement from TorrentBytes begins. “Problem is not lack of donations, but entirely on handling them. As of current every service provider the site has to pay for only accepts PayPal, Credit/Debit cards or direct bank wiring. Only one provider allows bitcoin.”

“Unless we can figure out some realistic and possible way to do site finances completely PayPal free, it seems like the story of TorrentBytes will end very soon after January 2013.”

At the time of writing the site is down and unreachable, possibly temporarily but possibly not. The question is, how many more will join it in 2013?

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The ISP, created in 2004 by Gottfrid Svartholm and Fredrik Neij of The Pirate Bay, usually hits the news due to their business strategy. PRQ’s philosophy says that if a website is legal in Sweden, they will not only host it, but defend it to the end. That has made it a haven for controversial sites that are less welcome elsewhere.

Time and again PRQ’s affiliation with The Pirate Bay and other file-sharing domains has seen the company raided, most recently during early October when authorities hunted down the operators of Tankafetast and Appbucket and took down dozens of sites in the process.

PRQ is known for respecting the privacy of its customers, even going as far as accepting cash in envelopes from website operators requiring the highest levels of protection. However, a decision just taken by PayPal might mean that this archaic method of payment becomes more popular in the months to come.

After targeting dozens of file-sharing, file-hosting and Usenet services in recent months, PayPal has just banned PRQ from its service and seized all its funds, not once but twice.

“First they froze our primary account without any prior notice – we can’t even receive funds to it,” PRQ told TorrentFreak in a statement.

“After we contacted their ‘support’ they stated that the support could not help us, BUT the person who was responsible for our account should contact us within a couple of days.”

As of today, PRQ are still awaiting that call, despite having a trading relationship with PayPal for the last three years.

PRQ told us that since PayPal is a big source of payments for the ISP they need to be able to process funds while their account is frozen. So the company asked PayPal for a solution.

“PayPal stated that we just had to open a new account to receive funds to until the primary account problem was resolved, and once it was resolved they would merge the two accounts,” PRQ explained.

That all sounded simple enough, but “PayPal dispute” and “straightforward” aren’t usually terms seen in the same sentence together, and this occasion was no different.

“So we started a second account, and that got frozen too so that we could not withdraw the funds, although we still can receive funds to the account,” says PRQ.

Not content with freezing two accounts, last week PayPal sent an email stating that they will be keeping all funds in PRQ’s primary account for up to 180 days to act as a reserve in case of any chargebacks. PRQ informs us that historically there have been almost none of those.

“That was it for us, that made us decide to discontinue PayPal forever. It’s sad that PayPal decided to f*ck us after three years of service,” PRQ concludes.

In the meantime PRQ is accepting Bitcoins and bank wire transfer while their Visa/Mastercard merchant account is being set up.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

On Tuesday, PayPal cut off its services to five Usenet resellers including XSUsenet, EasyUsenet and Usenet4U, reports the Dutch news site Tweakers. The Usenet providers can no longer accept PayPal payments and the funds that remain in their accounts have been frozen for 180 days.

While this is the first time that we have heard about Usenet providers being banned, the actions don’t come as a complete surprise. To be accepted by PayPal, file-hosting services now have to comply with a list of far-reaching demands entirely targeted at copyright-infringing and otherwise illegal files.

These terms also apply to Newsgroups.

Several of the disconnected Usenet providers confirm that their accounts were suspended because they violated the above terms. However, at least one of the affected companies said it was never asked for any of the information detailed above, while it clearly indicated that it was operating a Usenet service.

PayPal’s decision is a financial blow to the companies involved. Firstly because customers who prefer to pay through PayPal will take their business elsewhere, and secondly because they lose access to a substantial amount of funds.

TorrentFreak previously reported that several major file-hosting services suffered the same fate as these Usenet providers. Although PayPal was willing to continue doing business with some, the set of demands was too extreme for many file-sharing companies to comply with.

Just how far PayPal is prepared to go was explained to us by Putlocker. The UK-based company had its PayPal account frozen several months ago after it refused to allow the payment provider to snoop on files uploaded by its users.

“They basically wanted access to the backend to monitor all the files being uploaded, and listing all files of users if they wanted, regardless of the privacy setting that the user might have selected,” Putlocker told TorrentFreak.

“This is a complete invasion of privacy on PayPal’s part, as it’s none of their business what files users keep in their account. We have a solid abuse handling policy already, and we don’t feel a 3rd party company has any business snooping on our users,” the company added.

MediaFire, another large cyberlocker, also said it stopped accepting PayPal after the company was unable to reach an agreement with the payment company.

While there are still file-hosting services and Usenet providers that accept PayPal payments, this number is expected to decline further in the months to come. It is clear that PayPal’s new policies are in part the result of the copyright lobby. The question is, where will PayPal draw the line?

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Hollywood has painted a target on sites such as MediaFire, Putlocker and DepositFiles, but these legal threats are not their only worry. In recent months, PayPal has stopped working with these and dozens of other file-hosting services, citing piracy concerns.

To be accepted by PayPal, file-hosting services now have to comply with a list of far-reaching demands entirely targeted at copyright-infringing and otherwise illegal files.

Just how far PayPal is prepared to go is explained by Putlocker. The UK-based company had its PayPal account frozen three months ago after it refused to allow the payment provider to snoop on files uploaded by its users.

“They basically wanted access to the backend to monitor all the files being uploaded, and listing all files of users if they wanted, regardless of the privacy setting that the user might have selected,” Putlocker told TorrentFreak.

“This is a complete invasion of privacy on PayPal’s part, as it’s none of their business what files users keep in their account. We have a solid abuse handling policy already, and we don’t feel a 3rd party company has any business snooping on our users,” the company added.

The owner of another major file-hosting service, who prefers to remain unnamed, says that he tried to do everything to keep PayPal on board. The site in question says it complied with all publicly listed terms, but that didn’t help.

“We have talked to more than five PayPal agents, however, all they are saying is that we do not comply with their policies, and that we should stop processing payments using PayPal,” the owner told TorrentFreak.

“This has a paralyzing effect on the file-hosting industry where 90% of the users of some sites pay using PayPal,” he added.

Previously most file-hosting sites relied heavily on PayPal, but they will now have to switch to alternatives. The next question is whether PayPal’s example will be followed by others such as Visa and Mastercard.

If it’s up to the one man army of adult industry businessman Robert King, all payment providers will follow. King is actively approaching these companies and says he wont stop before all major file-hosters are disconnected.

While King’s efforts probably have some effect, he can’t take credit for disconnecting PayPal from Putlocker three months ago. United States-based MediaFire also told TorrentFreak that King had little to do with their PayPal issues.

MediaFire says it stopped accepting PayPal after the company was unable to reach an agreement with the payment provider.

“PayPal started a discussion with us in February regarding continued use of its service. Ultimately, we were not able to agree on how to move forward and, as such, stopped accepting new customers through PayPal in early June,” Mediafire co-founder Tom Langridge told TorrentFreak.

MediaFire sees PayPal’s recent actions as a direct consequence of the Megaupload shutdown.

“I think it’s fair to say that because of PayPal’s business model, it got burned by the sudden shutdown of Megaupload,” Langridge says. However, unlike some other file-hosters, MediaFire was fortunate enough to be able to prepare for the switch.

“We have been planning for this change for some time so the impact to new and future customers is negligible. We have seen no impact to continued sales since we stopped accepting PayPal,” Langridge told us.

While not all file-hosters are equally impacted, it is clear that the troubled industry has a long way to go before things calm down.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

According to a Paypal representative the VPN service violated “some agreements” because of TorGuard’s affiliation with BitTorrent.

Even after the owner explained that his company was just offering a VPN connection, Paypal didn’t change their decision.

However, 48 hours after we made the news public, Paypal has decided that it was all a mistake. TorGuard’s account is restored and thousands of dollars in funds are unfrozen.

—-
Hello TorGuard.net,

PayPal
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TorGuard is happy to be back with Paypal, even though they had to be outed before taking action.

“I’m amazed at how unprofessionally paypal handled this entire process,” TorGuard’s Jason told TorrentFreak. “Hopefully now we can get down to business as usual!”.

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Disclaimer: TorGuard is one of TorrentFreak’s sponsors.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

TorGuard is one of the many companies catering to this demand. As the name suggests, TorGuard has several plans specifically targeted at BitTorrent users who prefer to hide their IP-addresses from the rest of the world.

Being a BitTorrent-friendly VPN appeals to a wide audience. However, the company has also learned that it has a downside. Without prior warning or detailed explanation, PayPal decided to ban TorGuard for promoting their services to BitTorrent users.

The following email was sent by PayPal.

“When we reviewed your account, we noticed that your activity violates some of the agreements you have with us. Because of this, we’ve limited your accounts and can no longer offer our services to you. You’ll still be able to log in to view your transaction history, but you won’t be able to send or receive money.”

Because the email didn’t explain what agreements had been violated, TorGuard’s owner Jason decided to call the company for an explanation. But instead of helping him to resolve the issue, PayPal informed him that the account would remain closed.

“It wasn’t until I called PayPal and spoke with a business account rep that they explained PayPal doesn’t allow promotion of ‘torrent trackers’,” Jason told TorrentFreak.

“After arguing with the representative that we fall in the category of a hosting service they assured me the decision had already been made and nothing further could be done.”

Apparently, PayPal is going down the same route as Apple, where everything related to BitTorrent is simply a no-go. Over the past years the payment processor has already thrown out many cyberlockers and BitTorrent trackers that linked to infringing content, but to our knowledge this is the first time that a VPN service has been banned.

Needless to say, PayPal’s decision has resulted in quite a few hassles for the VPN service.

“They canceled hundreds of automatic payments and froze thousands in our account,” Jason told TorrentFreak.

“We can’t even issue refunds unless the buyer disputes the charge. Most of our clients have been very patient since almost everyone has been wronged by PayPal at some time or another,” he added.

PayPal’s aversion to BitTorrent comes after the entertainment industries repeatedly called on payment processors to take responsibility for their connections to online piracy and counterfeiting. While this is probably justified when a store is selling knock-off products, banning a VPN goes rather too far.

Despite the setback, business continues as usual for TorGuard. They have launched a new portable OpenVPN client for Windows, and a Mac and Linux version is coming soon. As for the payments, the company has plenty of alternatives available.

“We still accept all forms of credit card, Google checkout and couple of other secure wallet services. It’s ironic to use PayPal when buying a VPN/proxy anyway, they have a proven track record exploiting user’s financial info.”

“Those who are serious about private payment solutions should consider one of the many alternatives like Prepaid VISA cards, OKPAY, Bitcoins, and other ewallet services,” Jason concludes.

Update: Paypal restored TorGuard’s account after three weeks.

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Disclaimer: TorGuard is one of TorrentFreak’s sponsors.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

While many file-hosters panicked, former Megaupload users hopped from site to site trying to find a suitable alternative.

RapidGator was such an alternative, and in recent weeks the site saw its traffic increase from a few hundred to over a hundred thousand visitors a day. However, this newly gained popularity may only be short-lived as the cyberlocker has just lost its most popular payment option, PayPal.

“PayPal just informed us that our PayPal account is closed due to the high risks of processing file sharing payments,” RapidGator announced. According to the site’s operators this may very well be the end of the file-sharing industry.

PayPal has frozen the cyberlocker’s funds for 6 months and new users can no longer make payments through PayPal. The ban probably means that “affiliates” can’t be paid through PayPal either.

It’s not exactly clear what “high risk” PayPal refers to, but one of the most likely options concerns the many chargebacks people carried out at other cyberlocker services recently. Many users asked for their money back from PayPal when other cyberlockers such as Fileserve temporarily disabled public sharing.

RapidGator believes that PayPal’s policy will affect other file-hosters as well.

“Seems that all new file sharing hosts will experience same fate like us and all other big hosts,” they write, adding that the site will close if nothing changes in the coming month.

“We did our best to make it work, but unfortunately this circumstance doesn’t depend on us. We will run the host for a month, and if nothing will change, we will close it after,” the RapidGator team concludes.

While more cyberlockers may fall victim to the same fate in the future, for now many of the largest sites including 4Shared are still accepting PayPal payments.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.