By placing a ban on virtual currency transactions in their own fine print, but allowing most of the transactions to go through unless and until there is a problem, PayPal is setting themselves up for issues. In this case, only the author of the article was victimized, but it would be almost as easy to victimize PayPal/eBay itself even if the supply of legitimate Bitcoin sellers on eBay dried up.
One person could easily act as buyer and seller. Seller receives payment and withdraws it to a virtual bank account attached to a random prepaid credit card that can be bought at any store with cash, then "buyer" (the same person operating a different account) contacts PayPal and claims they never received it from the evil seller. PayPal must reverse the transaction and eat the loss because it was against their policies for the transaction to ever have taken place. There is some work involved, but even just one $300 transaction per day is certainly plenty of money for alot of the kinds of people that would do this.
> PayPal must reverse the transaction and eat the loss because it was against their policies for the transaction to ever have taken place
It's far from clear that PayPal must reverse forbidden transactions. In fact, the behavior seems to be "PayPal can do whatever it chooses with forbidden transactions." In computer science terms, the result of submitting a forbidden transaction is undefined: it might go through, it might not go through or something entirely unexpected (party van?) may occur.
Given the number of people who try to scam PayPal every day (it's a huge and visible target, to the extent that a security company basically spun out of PayPal), I'd be very surprised if this hadn't been tried already.
PayPal is infamous for freezing accounts indefinitely and even putting accounts into the negatives even on people who did nothing wrong. That scheme is not going to work. They are so intent on nuking any fishy business they nuke a ton of innocents as well.
No. That's not true. I once initiated a chargeback (and won the case) against a scammer seller. The amount was $80, but I inly got the $45 left in his account.
One person could easily act as buyer and seller. Seller receives payment and withdraws it to a virtual bank account attached to a random prepaid credit card that can be bought at any store with cash, then "buyer" (the same person operating a different account) contacts PayPal and claims they never received it from the evil seller. PayPal must reverse the transaction and eat the loss because it was against their policies for the transaction to ever have taken place. There is some work involved, but even just one $300 transaction per day is certainly plenty of money for alot of the kinds of people that would do this.