It's not the first time I have heard about them freezing funds - the last time was a few years back. From what I remember they were worried that the customers would ask for their money back if the product wasn't completed (explaining why they want to see a budget). This has nothing to do with fraud. They are allowed to do whatever they want with your money because they are not a bank.
It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here).
Either way, I would raise a massive stink if they don't buckle - I see you have a WIRED article, maybe approach them about writing about this encounter with PayPal. That's some pretty bad publicity right there. You may also be able to demand interest if they do continue to illegally with-hold the funds for that long (again, they are not a bank, but that means that this time they are not protected by those very same laws).
> It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here).
I wish I could agree, but the angry rants on a few Kickstarter projects show that many people see it as a "shop for things that haven't been built yet", rather than "give us some money, and we'll try to build these products, and if we do manage to build them you'll get one, but we could fail".
It's completely ridiculous because participants in crowd funding are aware of the risks - they may never see their money's worth (even though that isn't the case here).
Either way, I would raise a massive stink if they don't buckle - I see you have a WIRED article, maybe approach them about writing about this encounter with PayPal. That's some pretty bad publicity right there. You may also be able to demand interest if they do continue to illegally with-hold the funds for that long (again, they are not a bank, but that means that this time they are not protected by those very same laws).