Call of Cthulhu's Sandy Petersen Sues Paypal Over Withheld Funds [UPDATED]

[UPDATED!] Sandy Petersen, author of Call of Cthulhu, is suing PayPal. He claims that PayPal has withheld over $57,000 raised via Kickstarter for a (video game) project in 2013. You can read the full 8-page filing here. "To date, however, defendants wrongfully refuse to release the funds that plaintiff’s customers attempted to pay and/or pledge to plaintiff, despite the fact that plaintiff has already sent the purchased/requested productions to many of these customers. In fact, defendants have acknowledged in writing that the records plaintiff provided show the plaintiff has fulfilled purchase orders of PayPal customers in the amount of at least $22,675.00. Defendants still refuse, however, to release even these funds." The case was filed in Dallas, Texas.

This isn't Petersen's most successful Kickstarter campaign -- he recently raised over $1M for the Cthulhu Wars: Onslaught Two horror game, and The Gods War board game which raised well over half a million dollars.

As the filing mentions, the amount Petersen asserts is being withheld by PayPal is $57.702.66. Petersen says he has provided shipping records which prove that 22,765 of product has been already shipped to backers, and that PayPal has refused to release the funds for over six months now. Petersen is asserting his right to a trial by jury.

Petersen is currently the Vice President of the Board of Directors of Chaosium (he and Greg Stafford returned to Chaosium in 2015)as well as president and chief designer at Petersen Entertainment.

UPDATE! I've heard from Ian Starcher, Business Manager at Petersen Games, who says he'll send some more information after the holidays but as a quick answer: "PayPal (out of the blue) froze/took 57k of Petersen Games money from ALL sources of income. Kickstarter, our website, etc."

It's the New Year, and Ian has sent a slightly longer update:

"PayPal held $57,000 from Petersen Games unlawfully and without giving a reason other than "risk to PayPal”. We have zero history of issues previously with PayPal in any fashion. They withheld money from our Kickstarter, from our website sales, basically any place we allowed our customers to pay us via PayPal.

We jumped through all the hoops they asked us to so we could show we shipped, etc. so that they’d pay us our money. It cost us thousands of dollars in extra staff expense just to go through all the hoops they said we’d have to get paid.

They still won't give us any of our money, giving the same vague non-answer. So we've filed with the courts and are waiting for their response, to go to court, or get a default judgement against them. So far it's cost us thousands of dollars in legal fees.

PayPal has done this to a lot of game companies. I don't know if these unlawful acts by PayPal extend beyond the gaming industry.

We're all small businesses. None of us can take this sort of financial hit or the huge distraction this causes from our core business – making great games."

I asked him to clarify the difference between PayPal and Kickstarter funds, and he kindly did so -- "I should be more specific, the KS post campaign pledge manager as I recall."

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[aramis erak]

Fraud is a criminal offence. This is the application of terms and conditions agreed to by users of the service. It sucks, but there is a reason why this is a civil lawsuit, and Petersen didn't phone the police instead. Let's not invent crimes.

Fraud is civilly actionable in the US. (In fact, the US has no consistent limits on what one can sue over; it's actually easier to sue over a criminal offense - lower burden of proof than criminal, and don't have to convince a grand jury that it should go to trial.)

 

[Bolongo]

This who CoC KS was a fiasco; does not surprise me, something has been rotten in this Denmark since 7e was announced and millions of dollars misappropriated and misspent. All the money I gave to this company has yielded me about 2/3rds of what I put into it. Never again will I give so much money to a company on a KS campaign.

Not really relevant here. Sandy was not involved in the CoC7e KS.

As others have noted, it's unclear what this is really about, though. The only computer game I know about that he put up on KS didn't fund, so that can't be it. And his board games have all brought in much higher sums than this suit is about.

 

[carborundum]

I hope Sandy gets his money - I read loads of complaints from sellers about this. The last one that really stuck with me was this post from Prusa, who are being denied access to about $1 million!
http://www.prusaprinters.org/warning-businesses-never-use-paypal-primary-payment-method/

 

[Nikosandros]

Not really relevant here. Sandy was not involved in the CoC7e KS.

As others have noted, it's unclear what this is really about, though. The only computer game I know about that he put up on KS didn't fund, so that can't be it. And his board games have all brought in much higher sums than this suit is about.

Yeah, Sandy didn't have anything to do with the CoC 7e KS. Also, I've received almost all the items that I had paid for and I was refunded for the rest. That KS was mismanaged severely, but the old management of Chaosium is gone and the new one has made things right regarding the KS.

 

[Morrus]

This who CoC KS was a fiasco; does not surprise me, something has been rotten in this Denmark since 7e was announced and millions of dollars misappropriated and misspent. All the money I gave to this company has yielded me about 2/3rds of what I put into it. Never again will I give so much money to a company on a KS campaign.

Different company, different people.

This is Sandy Petersen Games, not Chaosium. And Sandy Peterson only rejoined Chaosium last year, long after the CoC 7E thing. He was not involved in that Kickstarter.


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[Morrus]

Morrus: FYI, I believe this Kickstarter wasn't a video game project, but rather the original Cthulhu Wars project, which raised about $1.3 million on Kickstarter in 2013. (It might have been for the subsequent French translation of Cthulhu Wars too.) The only video game KS they've run was for Cthulhu World Combat in 2012, and it never reached the funding goal.

I've reached out for clarification. I'll post if I hear anything!


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[Henry]

Paypal also has the dubious position of being a bank without legally being a bank, at least in the U.S. Therefore a lot of laws (such as FDIC insurance, which all banks must have, I believe) don't apply. It's a little shady, ethically speaking, but I use them, for the same reasons - it's convenient.

Interestingly, Google Wallet's services ARE FDIC insured, I just found out.

 

[Nikosandros]

Side story: I had the pleasure of interviewing Sandy once. We went to his house with a full crew and did a long and in depth interview. Unfortunately, I was not a good enough interviewer to keep such an... hrm... energetic guy on track. It was a mess so we ended up scrapping the whole thing.

I interviewed Sandy when he was in Lucca. I have no particular skills as in interviewer, but I must say that Sandy was very nice and he answered thoroughly all my questions.

 

[tomBitonti]

Some interesting history re: PayPal inappropriately holding funds. See, for example https://topclassactions.com/lawsuit...ek-final-approval-4m-class-action-settlement/
Thx!
TomB

 

[smiteworks]

The biggest problem with PayPal is that it is next to impossible to speak to an actual human whenever something doesn't go properly. We have used them for our storefront since 2004 and it works well for the most part. It keeps all the credit card information on their end so it prevents us from having to handle any sensitive payment information on our server -- greatly reducing our exposure. They have a few side services which they offer but then forget to support. The services which we bought into as vendors but then decided to remove are the gift certificates and the trial periods for subscriptions. The subscriptions are still kind of poorly supported and they create a lot of extra work for us, but they are still worth doing. We just removed the trials and went to a 30-day money back guarantee instead. There used to be no actual way to look up the trials until the first charge went though. The PayPal 6-month credit options are not bad but they only work for U.S. based customers and they could stand to be better documented from the consumer perspective.

I used to get hung up on the PayPal dispute process. If someone claimed that a charge was unauthorized, I would go verify that it came from the actual person making the claim, provide IP address lookups showing that it came from the area where the buyer lived and show other weblog activity to support it. My concern was that it would somehow flag us as a fraudulent seller if we had too many of those and I had no idea what would be too many -- 1 per month, 5 in a year, who knows?? Once I figured that it really doesn't seem to affect anything, I just issue a refund and cancel any subscriptions or accounts and move on. It's still annoying when people use that method instead of just emailing our support email to ask for a refund, but the end result is the same.

For us, PayPal always seems to hold about $2k worth of funds. I don't mind that. All in all, I sometimes consider changing to an alternate payment system but it never seems worth the effort of switching over all the back-end processes.