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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[Dannyalcatraz]

I've had lower overall risk of CC fraud due to paypal, and never had a particular resolution issue. I'm not defending them, but pointing out that the experiences people have with paypal can vary, and for me it's been the service I will always default to for online payments. For retail I have found it a necessary service to offer, and as a consumer I wouldn't shop has as much online without it.

I'm the same boat.

 

[turkeygiant]

I feel like there is probably more to this story, was this kickstarter ridiculously late? were a lot of backers coming to Paypal for refunds? The fact that they are mentioning the number of orders shipped as some sort of defense makes it sounds like Paypal has a issue with the number of orders they have shipped.

 

[ProtoClone]

Honestly, I am not surprised to hear this. My wife and I have had our own issues with Paypal making it hard to access money.
My wife hosts a yearly event where several dance instructors teach workshops over a two day period and there is a show for teachers and students. We have to pay a lot for the teachers, the spaces, the sound, lighting, and the photographer. So, after the event was over and it was time to pay people Paypal decided that it wanted my wife to verify her account, but wouldn't let her access it. They wanted her to call them, which she did and kept getting told someone would call her back...for three months she got the run around. Finally she was able to catch someone, after at least three months, who was qualified to help her with this situation and they just wanted her to confirm her SS#. By the time she was able to access the money to pay people we were already getting "Where is it" emails from the people we needed to pay. What do you say? Paypal is being difficult about letting me access the money? The person who is supposed to get paid doesn't care, to them it sounds like an excuse for being financially irresponsible.

Other friends within the same community have suffered the same situation. They were forced to go with some other company to handle such matters because Paypal kept making it difficult to access their money to pay people.

Paypal is not a bad service, but if you are dealing with high volume of transactions/cash, they are not the service to go through.

 

[aramis erak]

I have heard of this a couple of times. It seems paypal withholds money from projects/vendors they deem risky and keep it until the period has run out within which customers can complain. Basically they shift all the risk to the vendor. If the vendor actually needs the money to fulfill customers purchases then the vendor is out of luck, and possible out of business.

Which amounts to fraud and/or theft by deception.

When I click pay, I expect paypal to actually PAY whomever I sent money to.

 

[Morrus]

Which amounts to fraud and/or theft by deception.

When I click pay, I expect paypal to actually PAY whomever I sent money to.

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.

 

[GreyLord]

I used PayPal a long time ago. They got their accounts hacked and left no recourse for the customer, so I've never trusted them since. I will always advise people against using paypal.

Unfortunately, in our hobby, there are times when some individuals and companies force you to go through Paypal, whether you want to or not. Hence, I still use PP when forced, but prefer not to.

 

[Staccat0]

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.

 

[Shawn Kehoe]

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.

 

[resscane]

Does Pay pal keep the interest on said with-holdings? It seems to me that Pay Pal views itself as a bank, credit card, or a mere cashier, depending on which role suits them best. All liability is shifted to counter-parties and they take any chance they can to tweak a profit... ie fees and interest retained.

 

[Queer Venger]

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.