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Gizmo 3D Printers Indiegogo production delayed due to PayPal’s decision to reserve $80 000 of the funding. 

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Gizmo 3D Printers has regrettably been forced to let our Indiegogo backers know that we are faced with an unforeseen situation where PayPal has decided to block a large amount of the funding that has kindly been contributed to our Indiegogo campaign. Even after we've sent them all of the documentation they requested to release the funding (confirming the reasons and intentions for the funding etc)*, PayPal has informed us that they will not be releasing the funds anytime soon.

Their reasons for doing so are as follows (quoted from an email PayPal sent to Gizmo 3D Printers on 19 April 2016):

“During a recent review of your PayPal account, we determined that it was appropriate to apply a reserve to your account effective in 24 hours. A collateral amount of $80000.00 will be set aside from your current available balance. In addition, a rolling reserve will be set at 55% of the processed amount for each day, to be held for a 180 day rolling period. 

For example, 55% of the payments you receive are held at the end of the first day and will be released 20/04/2016, 55% of your payments are held at the end of the second day and will be released on18/10/2016, and so on.

The decision regarding your reserve setting was based on our review of the level of risk associated with your account. We looked at several factors in determining that there is a high level of risk associated with your account including:  
-  Delivery Timeframe - (Extended length of your delivery timeframe).  
Overall processing volume – (There is a significant change in the level of payments your business is processing compared to your processing history).  
High risk business model – (There has been a change in your business model or your business model is considered high 
risk due to one, or a combination of the following (list is not all inclusive) – how and when items or service are delivered,
- item or service being sold, inventory management). 
We regularly review reserve levels and make adjustments when possible. You will be notified if your reserve settings are adjusted (increased or decreased) in the future.”

Gizmo 3D Printers Founder Kobus du Toit feels the reasons listed, unfairly describe nothing out of the ordinary in regards to the situation Indiegogo campaign startups typically find themselves in - they can’t always deliver products straight away and they understandably haven't had a history of large income for example.

More importantly, the email indicated no way out of the reserve which will now lead to serious repercussions for Gizmo 3D Printers.

We will be unable to deliver the much appreciated orders from our backers in time if we do not have the money to do so. Plus we run the risk of losing our patent for which $10, 000 is due in a month’s time to keep it safe. Quite a devastating situation after working so hard for so long on building our good name and trust with our suppliers, distributors and the community which will also be affected by it. 

Therefore we’ve had no choice but to register a dispute against PayPal at the Financial Ombudsman of Australia which we did and we’ve received our case number. PayPal has 21 days to respond to the case (which means a 21 day delay in production at least). As it is now a legal matter, PayPal refused to communicate with us any further.

We initially thought that a last resort we could refund the Indiegogo orders and hope that backers will place them again through bank transfers. However, Indiegogo has informed us this is not possible. We now have to wait for the ruling of the Australian Financial Ombudsman and then might have to try and get through to PayPal to refund the money. We are also exploring other options as they are being suggested to us by the community.

In the meantime we've discovered that PayPal often blocks Indiegogo campaign (and other) funding. We’ve asked Indiegogo to in future inform campaign starters that this could possibly happen to them when running an Indiegogo campaign.

We apologise for any inconvenience this may cause and will appreciate your continued support through this unfortunate incident that we will keep you informed on through our newsletters, social media and Indiegogo updates.

Should you have any suggestions as to how the situation can be helped, queries or concerns about this matter, please feel free to email [email protected]

* The first email from PayPal outlining the documents that we've submitted to them:
"As part of PayPal’s commitment to providing the best possible experience for buyers and sellers, we perform routine reviews of merchant accounts. To complete our review and better understand your business, we need your assistance in collecting the following information: 

- Provide an explanation of the recent increase in volume processed within your PayPal account and your expected monthly volume (in AUD) going forward.
A written explanation describing your inventory storage method. · Provide documentation proving ownership of the item you are selling, listing, or renting out 
Upload or fax your supplier’s contact information. 
A written statement detailing your refund policy.· Please include a list of the activities you will engage in during the normal course of your business and how PayPal will be used as your payment provider.
Please provide proof of delivery for all items that are being sold prior to product availability.


Please send us an explanation if you’re unable to supply any of the requested information. Please log into your account and visit the Resolution Center. Please respond by to avoid any service interruption. If you have any questions, please feel free to contact us.

Sincerely,
PayPal Merchant Risk Operations"

 

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