I have started this message about a dozen times and cannot seem to get the wording just the way I want it. I suppose it is because every time I start I become angry. Angry at a company whose gross incompetence leaves me in awe.
I think a bit of history is in order first off. I am not really sure what prompted me to setup an E-Gold account. I know that it was sometime in early 1999. I did my first in-exchange on 4/30/99. This might qualify me as an early adopter since the batch number was 4723. There were two things that impressed me about E-Gold, one was that it is a cash based system. Not credit. It also did not rely on any national currency. You could deposit a gold bar, silver coin or just about anything that constitutes real money. It was a great way to make liquid a hard currency. But something happened. E-Gold split itself into G&SR and Omnipay. G&SR became the holder of E-Gold and Omnipay was the company used to fund E-Gold accounts. With this split came what I felt was a greater barrier to entry for E-Gold and suggested there had to be a better way to do it. About this same time came a new player on the market. A little company called paypal was started like most dot com startups. They had an idea for a payment service and brought it online. It is unfortunate, but the guys starting paypal had zero experience in the net world. The scam artists caught on quickly. Douglas Jackson spotted the problem right away and contacted paypal to help get the fraud under control. He writes about this at http://www.standardtransactions.com/en/douglasjacksononpaypal.htm I have always felt that paypal has had a good idea. I also believe it can be profitable if done correctly. Maybe someday that will happen, but it is not going to be paypal doing it. They wont last that long. I felt that payment service such as paypal could be used to fund E-Gold accounts. After several discussions with Jim Ray I decided that I need to prove him wrong. He told me I could not do it. He was partially right. I set up my exchange service the first part of this year. I bought some gold from a few friends that had gold sitting in their accounts. I started with paypal and an ACH service to take online checks. The checks turned out to be a real bad idea. The company I used did zero verification even though I was paying for that service. So that left me with paypal. My theory was that if I validated customers properly I would not run into fraud problems with paypal. I also felt I could automate the whole process to make funding clean and simple. I was able to automate the process. I could take a paypal order online and transfer E-Gold funds into an account with total automation. Problem is that paypal really sucks at validating accounts. I cut my automation to only marking orders as paid, but I have to click a button to actually do the funding. Any more than this was too risky. Paypal was hit with the famous paypal clone site. The last thing I needed was to become the laundering tool for this scammer. Now I had one more hurdle. I had to verify each and every customer. I did this by requiring them to give a phone number with the order. Paypal will not provide me with a contact phone number as part of an order. A big gaping hole in security on their part. I would check the phone number against the address on file with paypal using a reverse directory service. If they matched I would call to confirm the order. I caught several fraud attempts with this alone. If the number was unlisted the user would be required to provide a utility bill showing their name and address. Most identity theft crooks don't have this available. This was a great concept, but I still failed to miss one type of scammer. The one that is who they say they are, but reverses charges because they lost money. The first chargeback I received on my paypal account was just such a person. He bought E-Gold, dumped it in a ponzi and lost it. His solution was to reverse the charges done with paypal. Paypal of course hit me with those charges. With a chargeback on my account paypal notified me after the fact that I was now subject to a rolling reserve and would have to pay almost 4% per transaction in fees. The rolling reserve was 10% of my last 30 days gross revenue. This alone nearly shut me down. During this time I would try to contact paypal and have funds reversed when I found a bogus account. I could have stopped more fraud than the entire fraud department at paypal. What I mean by could have is that they never shut down any of the accounts I found as fraudulent. I tried working with them to get a system in place where I would be protected. After all they have a seller protection plan that is supposed to protect me from fraud. (right). I changed my service to require a pre-verification before an order could be placed. I setup my existing paypal account to only accept orders from verified account holders and had a verification request form on my website. When I received a request I would send out a signature form that had to be faxed or mailed back to me. I setup a new paypal account to handle only those customers. This new procedure resulted in a ZERO chargeback rate. This meant I could offer a lower rate to my customers. This was all setup after conversations with the head of business development at paypal. Last week I received a note from paypal that my account had been frozen pending a fraud investigation. I called and finally spoke with the head of the fraud division. He did not like that I had 2 accounts setup. I informed him that the second account was under my wife's name, her bank account, her credit card etc... Since she is also listed on the business license that everything was perfectly legitimate and explained to him why it had been done and who I was working with at paypal. He did not care, he said he has ultimate control over accounts and he did not want anyone using paypal who was dealing with E-Gold. I tried explaining once again about the ZERO chargeback rate on my account, but he did not care. He wanted my account closed. So as of now I have notified all of my customers that paypal is no longer an option. You see Jim was partially right. Working with paypal was a bad idea, but if paypal had a clue it would not be. I have started receiving feedback from customers who received the notice this morning. It is interesting how many horror stories they have to tell. I am going to be devoting more space on my website to this issue. I believe that now paypal is in it's death throws. I have received numerous notes from businesses that it has shut down because of a perceived risk. It does not matter if there is any, but I think it is posturing for shareholders. In the year 2000 according to paypals own numbers they lost $169,506,000 on revenues of $14,460,000. They don't tell us how much of that was due to fraud. I am sure it was a considerable portion. They are now trying to do an IPO. The underwriters have valued the offering at $80,500,000. That is not even enough money to cover operating losses. I think by making the appearance that they are getting tough on fraud they think they can get more funding. I have news for them, they are looking in the wrong direction. They are the ones committing fraud. Especially since they are trying to hold my money for 6 months before returning it. Thank you for reading this long tirade. Vince Callaway FreedomHound.com --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] Did you know that e-metal is a wonderful holiday gift? Avoid the hassle this year!
