Topic: TradeHill - Dwolla is being scammed and reversing transactions - page 4. (Read 19229 times)

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

That's my guess as well. And the possible implications are ugly.

I am pro Bitcoin. I want it to succeed. So it saddens me to raise the possibility that Mt. Gox has been Dwolla'd so badly that they are no longer solvent. If so, they can hide that for a long time as long as there is no "run on the bank", so to speak. So they would have incentive to not disclose loses, hoping they can make up the missing bitcoins with earnings.  But in that case, it seems like they would need to stem the bleeding by stopping Dwolla deposits ASAP. But they have not done that. Strange. Maybe they are hoping that Dwolla will return the money to Tradehill in which case there would be no need to disclose insolvency until that is resolved. I really hope this is all just wild speculation.

Anyway, the speculation will probably continue if they cannot explain why this is not an issue for them. It seems like it must be.

Just guessing out loud, but my *guess* at this point is that similar has probably happened at Mtgox but they have not noticed it yet.

Jared: If Dwolla doesn't rectify the situation, for how long will you continue to allow Dwolla withdrawals? Will you give your customers advanced notice before dropping Dwolla completely?

So CubedRoot has posted in the Trading Discussion forum that Dwolla has sent him an email stating that there are no chargebacks for just credit and debit card transactions.

They further stated that "bank returns and disputes have always been part of the Dwolla system.", "Sorry for any miscommunication.", "...putting together more information for the web site ... ", "...likely involve updating documentation", etc; see the posted email.

My guess is that Dwolla is worried that they "miscommunicated" the policy so badly that to immediately reject Tradehill would be untenable, so they are easing in the response in various ways while avoiding a direct conflict until the waters are muddied enough.

While they have not communicated with Tradehill, it seems like their position has been disclosed sufficiently to understand how they are likely to handle the disputed transactions and how they are going to operate going forward. Furthermore, Tradehill has the information necessary to make whatever decision they need to make beyond ceasing to do business with them.

Hard to see how Mt. Gox remains unaffected by this.

This thread's title states that "Dwolla was scammed", which implies Dwolla's ignorance. I might have worded it more accusingly, but perhaps Jered is only being diplomatic/open to the possibility that Dwolla just has some presentation errors. I would assume that the bank to Dwolla reversal could only occur if the bank or Dwolla account was stolen, otherwise the scammer must have presented a claim which I assume didn't happen.

There only difference is that a cashier's check purports to be guaranteed by a bank. Otherwise, there's no difference. They can both be counterfeited, dishonored or reversed, even a month after they supposedly cleared.

That article refers to *cashier's* checks, which is a totally different beast than a personal check. Apples to oranges. Never take a cashier's check, they are almost always a scam.

Then why not let me walk to their bank and make a deposit directly into their bank account?
I have the proof with the deposit receipt and even if it takes 3 days for them to confirm thats better than paying 10$ to 20$ in wire fees.

The problem is that payments, including checks, can be reversed long after they clear. For example:
http://www.snopes.com/crime/fraud/cashier.asp

Back in the day when I had active brokerage accounts they all required I write a check and they did not let me trade until that check had cleared.

This is still a big risk Error - we caught couple of stolen-password accounts this morning!  Dwolla is reviewing their activity now.

Well if all this is true, its only a matter of time before Mt Gox is screwed too and they will no longer accept Dwollas also.

I wonder how financial institutions who have to deal with these types of transactions do it. How do you trade in the stock exchange for example?

Here is the reply I received from Dwolla today about this "scandal".
It appears there have always been chargebacks available for ACH transfers, but there are no chargebacks if a Merchant uses their POS service to receive credit card payments.

Dwolla is aware of it. But if they can just reverse their payment, they have no incentive to do anything about it.

Yes.

Assumed by whom? Most likely, the reversal is the fraudulent part, but TradeHill has no way to know. That's between Dwolla and the person who reversed the ACH payment.

I get the whole Dwolla reversing charges after crediting TradeHill's account. But how does the scammer pull this off and how could Dwolla not be aware of it? The scammer transfers funds to Dwolla, transfers to TH, buys bitcoins, and reverses the original transaction from bank to Dwolla. Do I have that right? Is it assumed that the scammer stole access to the bank account?

Reversing a transaction means that the institution that performed a transaction debits the recipient and credits the sender for the amount of the transaction. A 'chargeback' is a specific case where funds are returned to a consumer by an issuing bank, reversing a credit card or bank account transfer. Generally the specific term 'chargeback' is used to indicate that it's in accord with specific Federal laws that give the consumers additional rights beyond what they'd normally have and prohibiting the financial institution from acting as a mere intermediary by making them responsible to the consumer for merchant fraud.

In this case, Dwolla charged back TradeHill. They had better be prepared to defend that action in arbitration. If they cannot show some fraud on TradeHill's part (or unjust enrichment, or something like that), or some law that exempts them from that requirement, they are fully liable. You can't reverse a transaction to Jack because you were defrauded by Jill.

If you promise to buy a video card from me for $200 and I buy the video card from NewEgg for $195, then give it to you and you don't pay me the $200, I have no right to charge back NewEgg. If I want to charge back my transaction with NewEgg, I have to show some fraud between NewEgg and me. Reserving the right to charge back, as Dwolla's ToU now says, still doesn't permit them to charge back without a sufficient legal justification.

As far as TradeHill is concerned, Dwolla sent them some money and then reversed that transaction. Dwolla initiated that reversal and they have to defend it. "A third party reneged on us" is not a reason to reverse a payment.

I really hope that Dwolla refunds TH the frauded money. However, I would guess that Smalleyster has a point - potentially they might have trouble refunding TH as the 0.25$ probably dont include a credit fee
On a seperate note: I think TradeHill really did a great job on playing with open cards and letting the community know about this problem (after Dwolla didn't resolve it). Personally, I highly prefer such open communication over non-informative messages "we stopped x or y" without giving reasons. So, a big thumbs up for the TradeHill communication style!

This might be a naive question - but since when are SEPA transfers reversable? (In case that you gave a correct and matching account name + account number.) I never heard nor have seen reversed SEPA transactions so far. Can you maybe elaborate on this?

I don't see how what Dwolla did by editing statements retroactively to HIDE their reversed transactions is different than fraud.

By forcing you guys to go public to get a response (if you do) they've already destroyed any trust I could have given them.

The question now is only how can we quickly and cheaply transfer money to TH? 10$ per transfer is out of the question for me personally.

I heard you guys mention ING p2p transfers on Bruce's show. I already have an ING account, and ING is fantastic! If TH takes a step to verify account holders in some way so we can avoid 60-day or 180-day transfer holds, I'm totally fine with that.