Flipper was hugely successful in its crowdfunding, but ran into difficulty with PayPal after having $1.3 million stuck with the financial institution. Bitcoin fix this?

Startup Flipper is developing a portable tool called Zero, it’s aimed at pentesters and hardware geeks and looks like a toy. Flipper Zero is open source and can be used to reverse engineer access to radio protocols, hardware and systems such as TVs and garage doors.

Flipper Zero
Flipper Zero, the “Hacker Tamagochi”. Startup kickstarter photo.

Tens of thousands of enthusiasts have raised over $4.8 million for the project, which has been on sale to the public since July this year. But while sales are doing well, the company isn’t getting much of that money, thanks to PayPal.

“It was a pretty big launch as we were out of stock for a long time up until that point and a lot of people rushed to buy the Flipper immediately after the announcement,” said Alex Kulagin, COO of Flipper Devices, the company that makes the Flipper Zero.

The Flipper Zero quickly became popular, both as an educational device and one that could do a few tricks. The tiny hacking device allows people to unlock cars and turn TVs on and off. Kulagin denied that Flipper Zero is a malicious hacking tool and said:

“We don’t give away any offensive tools that allow users to do bad things, and we certainly don’t give you anything more than you can with Arduino and a couple of modules.”

Wasn’t “Hacker Tamagochi” well received by PayPal?

Just before launch, Flipper Devices decided to give its customers more payment options, including through PayPal. “We’ve had some experience with PayPal up until that point, and it was fine – we charged about $100,000 over two to three months using their payment solution and successfully cashed it out,” Kulagin said.

Using PayPal was a huge opportunity for Flipper Devices, which allowed them to sell their product to a wider range of individuals.”

About two-thirds of customers chose to use PayPal to purchase Flipper Zero. Within 24 hours, $700,000 had landed in Flipper Devices’ PayPal account.

But soon the positive scenario changed. On the same day, PayPal placed the funds on hold, citing an “abnormally large increase in its sales activity”.

“Initially it was smooth,” Kulagin said of the PayPal freeze. “They gave access to part of the funds (we had $26,400) and [disseram que] would release the rest when provided tracking numbers [o que acontece automaticamente através da integração do Shopify]. We don’t worry too much about it.”

But even though they provided all the information requested, according to them, PayPal continued to freeze the funds.

Flipper Devices was then asked to provide a range of information, including beneficiary information, proof of identity, proof of address, company bank statements, proof of purchase of goods, and proof of fulfillment of 10 random orders.

“We submitted everything they asked for,” Kulagin said, “but they kept rejecting it for different reasons. First, they didn’t like the proof of address, then the proof of purchase of goods, etc.”.

Flipper then stopped accepting PayPal as a form of payment, but at that point they already had $1.3 million in amounts blocked on the platform.

In August, the scenario for the company was worrying, and news came that the account would be blocked for 6 months, making the situation even worse.

“I found out that our account is completely blocked, [e] money will be on hold for 180 days without a clear explanation of the reason, only: ‘Your account is inconsistent with our User Agreement’. So we have $1.3 million dollars stuck in our PayPal account with no clear way to get our money back.”

And Flipper went public on September 6, creating a Twitter thread about the case:

Bitcoin fix this?

Many parallels with the payment solution created by Satoshi Nakamoto can be drawn from this story. The first, obviously, is related to custody risk.

When we hold fiat money in any application, we are confident that it is within the reach of a trusted third party. And unfortunately, even the biggest banks have already betrayed the trust of their customers, both because of internal problems and terms of use that are not clear enough or that can be misinterpreted.

Bitcoin introduced in 2009 the first way to handle values ​​over the internet without the need for a trusted intermediary. It quickly became a solution to the censorship of centralized financial solutions. Several cases even bear the name of PayPal.

In fact, Bitcoin gained notoriety when PayPal froze the account of free speech activist journalist Julian Assange. This happened in 2010 and, interestingly, ended up making Assange more financially relaxed with thousands of bitcoins accumulated.

In Brazil, in 2020, PayPal also closed the account of philosopher Olavo de Carvalho, who passed away earlier this year.

Now, ironically, PayPal is one of the big finance apps that offer cryptocurrency trading to their customers.

It is worth noting that there are solutions bitcoiners for crowdfunding, such as the non-custodial platform Tallycoin used by Canadian truckers who were censored by GoFundMe. And tools to receive even with greater privacy, like PayNym from Samourai Wallet.

However, as we mentioned earlier, PayPal was partly responsible for a large increase in sales of the hacking device, and bitcoin is still not as used for payments. It is a matter of adoption for cryptocurrency to actually start fixing these problems.

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