TradeHill - Dwolla is being scammed and reversing transactions - page 3.

dacoinminster

legendary

Activity: 1260

Merit: 1031

Rational Exuberance

Quote from: Jered Kenna (TradeHill) on July 27, 2011, 02:50:16 AM

Today on IRC and via email, two other exchanges confirmed they had transactions that 'vanished' and that were 'reversed'. We are waiting for them to make this public.

Any exchange using Dwolla CSVs over the past two months almost certainly has loses to the order of 3 to 9% of their volume.

Adam

This could mean that some exchanges no longer have the funds to cover all their liabilities, and are now operating on a "fractional reserve" model where they just hope everybody won't withdraw their money all at once. Kinda scary.

This is why I try not to leave any more money than I have to on the exchanges. There is nobody looking over their shoulder to make sure they aren't making big loans to themselves, writing off big losses, etc, all while naively intending to pay the money back "someday, with our future profits"

westkybitcoins

legendary

Activity: 980

Merit: 1004

Firstbits: Compromised. Thanks, Android!

Quote from: Jered Kenna (TradeHill) on July 26, 2011, 03:13:22 AM

Quote from: JoelKatz on July 26, 2011, 02:48:03 AM

Quote from: grod on July 26, 2011, 02:01:12 AM

Joe Smith: "Mr bank, please initiate EFT to account XYZ."
Bank: K.
Dwolla: Funds received to Mr. Bogus T. Fradulent's account.
Joe Smith aka Bogus T Fradulent: "Mr Dwolla, please send em to Trade Hill, account ABC "
Dwolla: K.
Trade Hill: "Funds received to Bogus T Fradulent's account."
Joe Smith aka Bogus T Fradulent: "BUY BUY BUY SEND SEND SEND"
Joe Smith: "Mr bank, I made an error. I sent to account XYZ, I meant PDQ."
Bank: K. EFT reversed, reason of Joe Smith's funds deposited to wrong account. Dwolla, never mind that deposit to account XYZ.

Which brings up the question -- What is Dwolla's business model? How can they do no chargebacks at only 25 cents per transaction? One fraudulent payment reversal in every 5,000 transactions would bankrupt them.

They've clarified it today. They do chargebacks. Unfortunately they had told us that they don't.
It's 4:15, I'm going to get some sleep, I'll be available tomorrow.

Jered

And it took two weeks for them to just man up and admit this?!

Yeah, that's BS. Appreciate you guys forcing them to reveal this. Too bad it had to get to that point.

cypherdoc

legendary

Activity: 1764

Merit: 1002

http://agoristradio.com/?p=438

listen to this very interesting Agorist Radio podcast History of the Cypherpunks.

its been a coupla months since i listened to it but a central point from the panel discussion was that banks LIKE chargebacks b/c it gives them an excuse to charge higher fees.

in Dwolla's case, in order for them to survive IMO the only choice is for them to charge more. i've never understood how they could make money at $0.25 per tx.

linenoise

sr. member

Activity: 309

Merit: 290

If dwolla can reverse across the board why would anyone continue to use them? They've been pushing the 'as good as cash' for quite awhile, they even still have FAQs about how easy it is without the worry of chargebacks. They want brick and mortar merchants to use this, but why would I want to sell even a cup of coffee via dwolla if it may end up being a fraud transaction later on.

I was about to start accepting dwolla for a non-Bitcoin online service to hopefully avoid some of the 3% fees paypal and CC processors take, along with the hassle of those payment system chargebacks. But why try to get people to use another service if Dwolla will be just as bad as what's out there already.

EhVedadoOAnonimato

hero member

Activity: 630

Merit: 500

That's big. It could possibly mean that Dwolla simply doesn't have the resources to take these frauds on their balance sheet. That's probably why they are silent: they know they should refund you, but they just can't.

Maybe you'll have no other option but suing them.

Jered Kenna (TradeHill)

sr. member

Activity: 420

Merit: 250

Today on IRC and via email, two other exchanges confirmed they had transactions that 'vanished' and that were 'reversed'. We are waiting for them to make this public.

Any exchange using Dwolla CSVs over the past two months almost certainly has loses to the order of 3 to 9% of their volume.

Adam

EhVedadoOAnonimato

hero member

Activity: 630

Merit: 500

This is sad.

I've always been a little skeptic about escrowed exchanges. I realize their importance to most people, particularly large business who just can't afford to evaluate the trustworthiness of every individual they exchange currency with. But the thing is that they need to have a public link to the current banking system, and that makes them vulnerable to all sorts of issues, including what we're seeing here.

I think the best way out for them now, besides using irreversible means of payment like Liberty Reserve (actually, does it remain irreversible?), is to try to hire insurances. That would make everything more expensive, but that's the cost of the banking system, if you want to use an escrowed exchange you'll have to pay for it.
I wonder though if it they would manage to find any company offering insurances to something as peculiar as bitcoin exchanges at an affordable price.

Where's that CoinPal guy now? He had a robust fraud prevention system. Couldn't the same techniques be applied to credit card or bank transfers?

Jaime Frontero

full member

Activity: 126

Merit: 100

Quote from: JoelKatz on July 27, 2011, 01:10:40 AM

I don't think Dwolla has an answer yet. I suspect that they're rethinking their whole business model right now.

There's a market for $0.25 transactions. But Dwolla is going to have to figure out how they're going to handle fraud in a way that doesn't drop their profits to zero (which is going to mean making everyone else eat the fraud costs) and they're going to have to communicate that clearly to all parties.

[emphasis mine]

yup.

but... they're basically competing against the cheapest wire available: 10 bucks/3 days. right?

that sure leaves them plenty of room to compete. would anybody mind - especially now, with reality as it is - a $1 USD charge? probably not. still pretty damn cheap, comparatively.

but maybe from somebody else. i must say that i'm not terribly impressed with dwolla at the moment. it'd take one helluva campaign on their part to convince me otherwise.

tvbcof

legendary

Activity: 4760

Merit: 1283

Hypothesis alert! (These kinds of ideas hit me when I am in the shower somehow and I just got out.)

Two things seem particularly mysterious about this issue:

1) Dwolla's silence and unwillingness to communicate with Tradehill for no understandable reason.

2) The seemingly disproportionate effect on TH vs. all other exchanges.

The idea which hit me is that for the last decade or so 'national security letters' have been being used like confetti (in the US.) An interesting feature of these is that complete silence on the part of the involved parties is demanded and usually obtained. So, for example, the NSA can not only walk into a library and demand their checkout list, but also compel the Librarians to not utter a word about it. (A few years ago Librarians 'struck' and destroyed all of their records in disgust as I recall.)

So, I wonder if Tradehill is the target of a national security investigation? It was not to long ago that certain congressmen were making noise along these lines about Bitcoin generally, and Tradehill seems to me like it could be a high-value target.

Part II of my hypothesis is that TH may have been being specifically set up and hence the disproportionate malfeasance that they seem to have encountered.

billyjoeallen

legendary

Activity: 1106

Merit: 1007

Hide your women

You could ask them more directly. :
What is Dwolla's Phone Number?
Last Updated: Jun 29, 2011 08:24AM CDT
From 9AM to 6PM Monday - Friday Dwolla's customer service is available at 515.280.1000.

(from their website)

JoelKatz

legendary

Activity: 1596

Merit: 1012

Democracy is vulnerable to a 51% attack.

I don't think Dwolla has an answer yet. I suspect that they're rethinking their whole business model right now.

There's a market for $0.25 transactions. But Dwolla is going to have to figure out how they're going to handle fraud in a way that doesn't drop their profits to zero (which is going to mean making everyone else eat the fraud costs) and they're going to have to communicate that clearly to all parties.

Smalleyster

member

Activity: 84

Merit: 10

I yam what I yam. - Popeye

Quote from: bbit on July 26, 2011, 10:47:12 PM

Dwolla's F.B statement ?

That's basically the same non-answer they emailed back to me. So I just emailed the back the link to TH's blog statement. I don't expect to hear anything more from them other than declaring bankruptcy soon.

bbit

legendary

Activity: 1330

Merit: 1000

Bitcoin

Quote from: indio007 on July 26, 2011, 11:56:41 PM

Well that' the second time today I've seen a correspondence ask them a question and the response was "If you have any questions just ask."

That's simply taking everyone as stupid.

deleting the comment = hiding something which is even worst then not answering it!

indio007

full member

Activity: 224

Merit: 100

Well that' the second time today I've seen a correspondence ask them a question and the response was "If you have any questions just ask."

That's simply taking everyone as stupid.

bbit

legendary

Activity: 1330

Merit: 1000

Bitcoin

Quote from: indio007 on July 26, 2011, 11:45:35 PM

What kind of god damn answer was that? That was a question you dolt!

Dwolla has completely and utterly avoided addressing the issue. That's what scares me.

this is very, very scary ...I'm assuming they are treating their F.B as a way to answer people's questions ?

indio007

full member

Activity: 224

Merit: 100

What kind of god damn answer was that? That was a question you dolt!

Dwolla has completely and utterly avoided addressing the issue. That's what scares me.

bbit

legendary

Activity: 1330

Merit: 1000

Bitcoin

Dwolla's F.B statement ?

bitrick

member

Activity: 64

Merit: 140

Quote from: netrin on July 26, 2011, 10:13:25 PM

Suppose you had dollars in Dwolla today. Would you transfer it to Mt. Gox or return it to the bank?

I would transfer enough to Mt. Gox to buy and immediately withdraw your limit of bitcoins (assuming that is why the money is there to begin with). If its a lot of money, send the rest back to the bank if you are worried about it.

That said, I actually think Dwolla is a little better bet than Mt Gox right now. It looks to me like Dwolla is going to avoid (their) losses for now, right or wrong. (If it goes to arbitration, that's a different story.) I am not sure about Mt. Gox.

cypherdoc

legendary

Activity: 1764

Merit: 1002

Quote from: netrin on July 26, 2011, 10:13:25 PM

Suppose you had dollars in Dwolla today. Would you transfer it to Mt. Gox or return it to the bank?

i was nervous enough to cancel a bank transfer to dwolla at a cost of $60 to me today.

error

hero member

Activity: 588

Merit: 500

Quote from: netrin on July 26, 2011, 10:13:25 PM

Suppose you had dollars in Dwolla today. Would you transfer it to Mt. Gox or return it to the bank?

I never keep USD in Dwolla for more than a few minutes.

Topic: TradeHill - Dwolla is being scammed and reversing transactions - page 3. (Read 19245 times)