Chargebacks

StormPay allows the account of a seller to be charged back if the buyer claims non-receipt of the auction item. However, this does not apply to services, as in the Terms of Service. The fee for a chargeback is $35, and, as documented on Money Maker Group Forum, this may cause a negative balance to appear in one's StormPay account. The balance may be restored automatically by StormPay by deducting the necessary funds from one's attached bank account. If one then attempts to charge back StormPay from the bank, StormPay will immediately freeze the account and alter the balance to -$10,000. Excessive complaints by users will also cause an account to be frozen, which prevents the owner from sending or receiving money, but does permit the refunding of money, if available, to previous payers. According to terms, the funds in frozen accounts may be released 180 days after the freezing, however the majority of frozen accounts were suspended in February 2006, and remain suspended.

History

TymGlobal

McConnell, one of the founders of StormPay, had previously used the service as the payment processor for a pyramid/ponzi scheme, TymGlobal, in 2002-2003. An order to cease and desist was given by the Tennessee Securities Division. All references to TymGlobal were then removed from StormPay in an attempt to clean up its image, after which it became a general online payment processor usable for any purpose within its Terms of Service. In 2004-2006, StormPay was used almost exclusively by autosurf websites, Paid To Read sites, high-yield investment programs, money randomizers,gifting clubs, and online auction sales.

Lawsuits

On August 17, 2005, a lawsuit was filed against StormPay. It was later dropped.
12DailyPro Ponzi Scheme. 12DailyPro was a version of what is commonly known as a "paid autosurf" program where "investors" deposited money and received an extremely high profit (44%) within a short period (12 days). Charis Johnson created what authorities considered one of the largest modern-day versions of the Ponzi scheme. She accumulated a total of over US$1.9 million from the program. More than 300,000 people joined over the course of eight months, spending over $500 million. When a federal investigation of 12DailyPro took place, its main payment processor, Stormpay, froze all funds related to it. Stormpay has since refused to return any of these funds. On February 24, 2006, the United States Securities and Exchange Commission (SEC) ordered 12DailyPro and its parent company to cease and desist all operations. On February 28, a Los Angeles judge ordered all company assets and records to be turned over to an appointed receiver for investigation. Charis F. Johnson now faces criminal and civil suits from both local and federal agencies.

Controversy with autosurfs

On 31 January 2006, StormPay formally announced on its website that it would not allow itself to be used on any site which also offered another payment processor, such as PayPal or e-gold. The justification of this move was to prevent the transfer of funds between payment processors, which would increase the likelihood and untraceability of fraudulent money. However, this move was also seen by some as the first step in establishing a monopoly over its niche market. As a result, many autosurf websites elected to remove other payment options, while others elected to remove StormPay. This occurred despite the fact that StormPay, at one time, provided members with the option to fund their StormPay accounts via e-gold.

By 2 February 2006, StormPay had suspended or frozen numerous StormPay accounts, especially those used by the administrators of autosurf sites, seemingly regardless of whether they complied with the original request. Emails sent to StormPay questioning the issue were responded to with the following:

Unfortunately, we are unable to process any further transactions on behalf of the merchant. StormPay Inc. certainly understands your concerns regarding this situation. However, the funds of this merchant were frozen by an outside organization pending further investigation. To protect the integrity of the investigation we are unable to release any details at this time. Once the funds are released, StormPay will release the funds to claimant(s) for disbursement.

On 5 February 2006, StormPay posted a second announcement on their website stating that they had "closed the accounts of what appear to be some major ponzi schemes", because of "results of investigations into those businesses by outside investigational organizations as well as our own internal investigations. As a result, possible victims of these businesses" had conducted distributed denial-of-service attacks against them leading to the recent downtime of their service. This is in contrast to their first announcement, only stated that other payment processors had to be removed. The now defunct autosurf 12DailyPro announced plans to send a lawsuit against StormPay. However, the autosurf was soon discovered to be a ponzi scheme and was ordered to cease and desist.

For a prolonged period spanning February 8 to 10, 2006, the StormPay website was again unavailable due to a DDOS attack.

One result of this controversy is StormPay's conversion to an auction-only site. On 23 March 2006, StormPay announced on its website that it would "no longer accept payments for sales made outside of StormPay Auctions", in order to ensure "a safer online experience for both buyers and sellers" as it would "more closely monitor the products/services sold". This means that all money transferred through StormPay must be accompanied by a product, which StormPay can monitor. As a result, StormPay is no longer usable for "investments" in autosurfs or HYIPs.

Related Posts