The 10 Biggest PayPal Lawsuits in Company History


Nowadays, paying and receiving money online has become easy thanks to digital payment systems like PayPal. With more than 360 million active users in over 200 countries, PayPal facilitated over fifteen billion transactions in 2020 alone. The company was formed in 1998 to give consumers an alternative way to buy products, receive, and send money virtually. Users must synchronize their bank accounts and credit or debit cards to their PayPal accounts. That allows them to shop at participating stores. Essentially, PayPal is the bridge between you and sellers that keeps your payment information secure.

What are the ten biggest PayPal lawsuits in company history?

While PayPal has seamlessly helped millions to transact online safely, it’s had a fair share of legal battles ranging from withholding funds to violating the User Agreement and Acceptable Use Policy (“AUP”), among others. Here are the ten biggest lawsuits the company has faced over the years.

10. The People (Moises Zepeda) Vs. PayPal – $4 million deal over frozen PayPal accounts

In 2017, a federal judge in Oakland, California, ordered PayPal to pay $4 million to its users. He ruled after numerous users complained about unexplained account closures over six years. The Senior US District Judge, Saundra Brown, issued the ruling in March 2017, terming it “in the best interest of the settlement class.” The main plaintiff, Moises Zepeda, took PayPal to court in 2010 after failing to access his account. He claimed that he got a message that his account was limited though he didn’t engage in anything suspicious. To his surprise, PayPal claimed it did so because of security. Zepeda was infuriated because he couldn’t access funds from his business account. The second plaintiff with a similar case was Devinda Fernanda. This time, he sued PayPal and eBay, claiming both companies maliciously restricted and closed users’ accounts without notice citing suspicious activity claims. The defendant and plaintiffs negotiated in 2011 when they reached an international settlement.

9. Sheena Small Vs. PayPal – PayPal freezes a young Knox County woman’s funds for over a year

Sheena Small always relied on PayPal to receive unemployment benefits during the pandemic (2020). She lost her job due to the COVID-19 pandemic but was eligible for federal and state unemployment. Her only option was to create a direct deposit account with PayPal to get a debit card after seeing an ad from PayPal: use direct deposit for government and payroll payments. She didn’t have to wait for it as PayPal directed it there, allowing her to use it immediately. After a few days, PayPal availed her debit card with $7,000 in unemployment funds in her account. She started using it immediately and praised it for being fast and easy. However, these golly moments didn’t last. PayPal froze her account in July 2020 and never explained why. After asking why, they replied that they didn’t have information in front of it, and they were to release her funds after 180 days.

In January 2021, PayPal sent her a message stating they would hold her funds for 180 more days. For weeks, she texted PayPal, pleading with them to unfreeze the funds, but they didn’t do so. With a small baby and no job, Sheena was forced to take a title loan with high-interest rates. The company did little to reactivate her account, prompting her to seek legal intervention. In mid-summer, she hired Bennett Hirschhorn, a Knoxville attorney, to file a breach of fiduciary duty and breach of contract motion. After a few days, PayPal “mysteriously” credited her TVA Credit Union account with $4,400. Her lawyer believes PayPal knows what it’s doing and intends to get $25,000 out of them to pay off her debts and legal fees. He argued that the whole point of unemployment is to fund people with no job.

8. Chris Moneymaker Vs. PayPal – The 2003 World Series Poker winner sues PayPal for confiscating money and freezing his account

Another case that got PayPal into legal trouble involved a class-action by Chris Moneymaker, the 2003 World Series Poker in 2022. Moneymaker sued the company after it froze his account with $12,000. His case recruited more users to act after noticing PayPal’s unfairness in holding on to funds for 180 days without reasonable explanations. The plaintiff used his social media account to garner support from the power community and sundry affected by the same unreasonable policies by the world’s largest e-wallet. Ten days after tweeting, PayPal miraculously refunded his money and had his account reopened. Moneymaker felt that PayPal “chickened out” after exposing the malpractice on Twitter. According to BNN Bloomberg, his attorney, Eric Bensamochan, was disappointed by this turn of the event but promised his plaintiff that it wasn’t over yet.

7. PayPal Vs. Google – Google’s bid to launch mobile payments unravels bitter secrets between the two rivals

Two giant companies, Google and PayPal, engaged in a legal battle after one of the latter’s ex-employee misappropriated the company’s secrets. Google had just announced its intention to launch a new mobile wallet for Android users. For two years, Google had “begged” PayPal to facilitate payments on mobile devices. Before they signed the contract on October 26, 2010, Google changed its mind. Instead, Google’s co-founder, Larry Page, hired PayPal’s ex-vice president, Osama Bedier. PayPal sued Google, citing Bedier’s knowledge of its plans for mobile payments. Also, it accused him of trading secrets, which involved keeping “confidential information in locations including his non-PayPal computers, email accounts, and Dropbox.

The lawsuit notes that Bedier applied PayPal’s trade secrets to help Google develop a mobile wallet strategy. Moreover, he applied his knowledge to selling Google’s mobile wallet to giant retailers. He also talked other PayPal employees like Tilenius to Google’s team.

6. San Jose user Vs. PayPal – A man loses $2,450 to a fraudulent job-hunting dealer via Venmo

Venmo is a person-to-person app for receiving and accepting money. However, its site prohibits users from using it for business payments unless explicitly authorized by them. According to PaymentsJournal, PayPal’s Venmo recently got into a legal problem after failing to inform its client about the risks of transacting via it. The man from San Jose filed a class-action lawsuit against PayPal after losing $2,450 to an unknown person. He claims that the conman lured him into buying products via Venmo only to disappear. Ideally, the app should encrypt data or have mitigation tools to teach customers how to use the app. They also need to warn users against sending money to unfamiliar people. This wasn’t the case in PayPal’s Venmo.

5. The People Vs. PayPal – PayPal to pay $5.2 million for violating notification rights in 2005 motion

Ideally, in detail, PayPal should notify consumers about the terms and conditions of specific transactions. However, consumers filed a motion through the US District Court in Brooklyn, New York, after failing to honor their part. The court ordered them to pay $5.2 million ($3.5 million to consumers and $1.7 million to attorneys general in states).

4. Lena Evans, Roni Shemtov & Shbadan Akylbekov Vs. PayPal – PayPal’s malpractice of seizing funds from clients’ accounts without any due or fair process (January 2022)

Earlier 2022, the US District Court for the Northern District of California granted a motion filed by the three plaintiffs. According to Engadget, one of the plaintiffs, Lena Evans, claimed that PayPal held on to her $26,984 for 180 days. She claimed that the digital payment system froze her account without informing or telling her why. That happened after she tried exchanging money from eBay for a poker league she runs.

The second plaintiff, Roni Shemtov, filed a motion against PayPal for holding on to more than $42,000. Like Evans, she never got any explanation from the company for terminating her account. PayPal argued that she was at fault after using the same IP with other users. Another representative said she violated PayPal’s policy of selling yoga clothing 20% lower than retail. She denied all these claims. Shbadan Akylbekov claims PayPal confiscated more than $172,000 of his money without any explanation. The plaintiff used his wife’s company to sell Hyaluron pens. PayPal closed his account for 180 days but never refunded the money. The company argued that the plaintiff used its platform to sell an FDA-unapproved product, violating its AUP agreement.

3. Leonid Kaplan Vs. Paypal – PayPal agrees to pay the plaintiff $10 million on February 26, 2021, in currency conversion class-action damages

The Ontario Superior Court of Justice received currency conversion practices and disclosure complaints against PayPal from Leonid Kaplan in 2018. She represented other Quebec PayPal Users in arguing over currency conversions related to purchases and unauthorized withdrawals from their accounts. PayPal denied the claims, maintaining that its seamless payment algorithms cannot compromise its user’s convenience. After going through statements from the plaintiff and defendant, Ontario Superior Court ordered PayPal to pay Kaplan $10 million and 25% of the settlement payment in legal fees to her lawyers.

2. User Vs. PayPal – PayPal seizes money from customers’ accounts without notice, reason, and recourse (February 28, 2022)

PayPal was once again sued by a user in Los Angeles for withholding funds for 180 days without issuing notice, reason, or recourse.Aplaintiff represented by the Ramji Law Group, took PayPal to the Los Angeles Superior Court in February of 2022. The legal team argued that PayPal unlawfully seized the plaintiff’s and other customers’ accounts after alleging that they violated the User Agreement and Acceptable Use Policy (AUP). Ideally, PayPal would notify the user about the likelihood of seizing their funds and closing accounts before acting.

However, PayPal’s legal team defended their actions by stating that on May 24, 2021, they informed their client that he violated their AUP. As a result, they permanently limited his account; hence he won’t conduct any transactions for 180 days. Once the waiting period was over, PayPal never refunded the users funds. The account had around $150,000, which PayPal withdrew around November 26, 2021. They never informed the user about this recent development, prompting him to file a lawsuit against them. The users attorneys condemned PayPal’s actions, terming them malicious. This case proves that it’s only a matter of time before other users get wind of it and look for alternative digital payment methods.

1. Felipe Vidaurre Vs. Paypal – PayPal charges hefty hidden fees through its “Buy Now, Pay Later” service, inconveniencing ‘poor’ customers (March 1, 2022)

PayPal users were thrilled when it introduced the “buy now, pay later” in 2019, offering space payments over a month. The company’s goal was to give customers spread out payments at checkout. However, low-income customers felt duped because of the hefty fees charged on the service. It was only a matter of time before one, Felipe Vidaurre, entered a $5 million class action with them on March 1, 2022, in a California federal court. The plaintiff argued that PayPal’s “Pay in 4” service misrepresented the likelihood of insufficient fees or overdraft charges. Ideally, this service works by dividing payments into free interest fees and zero late fees.

According to Top Class Actions, Vidaurre represented many users who complained about recurring risk of many insufficient overdraft fees charged by their banks due to PayPal transfers from users’ checkout accounts. In his case, he was charged three separate overdraft fees worth $90. So, anytime unsuccessfully repeated a payment transaction, PayPal imposed the fees repeatedly. The lawsuit targets consumer laws seeking damages, restitution, and a jury trial.

What’s next for PayPal after these ten biggest lawsuits?

Half of these lawsuits revolve around unauthorized account closures and freezing of accounts. PayPal profits from the thousands of daily transactions from millions of its users. So, it’s not good for their image and business profile to encounter such lawsuits unless they tame their systems. While some users’ accounts might seem suspicious, the biggest losers are those who aren’t. Their legal battle with Google is about poaching employees who share trade secrets. Despite this lawsuit, Google promises to vindicate its image and come up with a better e-wallet than PayPal. All in all, PayPal’s only way of staying away from these court battles is to upgrade its systems, ensuring users’ accounts are safe, fast, and easy to use.

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One Comment

  1. Paypal held my money for lifesaving medicine! An held money from a friend for my property taxes an I lost my property to auction! And I a disabled elderly man! They screwed my whole life up! Bastards an you wonder why 600 mass shootings in a year in this screwed up country crooks for presidents an corporations poison the people with pesticides! You know it’s bad when more people killed here than in a war in Ukraine its those insane Republicans an greed!

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