The Gizmo 3D Printer Suffers Delay Due to PayPal Freezing Their Account

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3dp_gizmo_logoThis week, Australia-based startup Gizmo 3D Printers has run into a production delay thanks to online payment service PayPal. On an update posted to their successfully funded Indiegogo campaign page, founder and co-owner of Gizmo 3D Printers Kobus du Toit broke the news to their backers that PayPal has effectively frozen most of the money that was raised. It looks like the company may need to suspend production until they can compel PayPal to release their money to them in full, or work out another way to get the funding needed to begin production. This delay comes at a terrible time for Gizmo 3D Printers, as they have already begun ordering parts, and are also expected to pay fees related to their attempt to patent their technology.

Building off of the much deserved buzz that they generated at CES 2016, Gizmo 3D Printers launched their crowdfunding campaign for their new family of DLP resin 3D printers in March. The campaign would ultimately be a success, raising over $135,000 and exceeding their goal figure by almost 40%. Gizmo 3D Printers unveiled their machine in London at the iMakr Desktop 3D Printing Show, where 3DPrint.com was on hand to see it live. Since the Indiegogo campaign ended on March 31st, du Toit has been regularly updating his backers on their ongoing progress, including two weeks ago when their funds from Indiegogo were finally deposited into his PayPal account.

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Gizmo 3D Printers at iMakr London in March [Photo: Sarah Goehrke/3DPrint.com]

Everything seemed to be on schedule until April 19th when out of nowhere PayPal notified Gizmo 3D Printers that their funds were partially being held back in reserve. PayPal notified them that $80,000 of the money that was deposited will be held in check and only released in small block payments a little at a time, a process that could stretch out to 180 days. While du Toit told 3DPrint.com that he provided them with all of the information that they requested to prove that they are a legitimate company and will need their frozen funds to start manufacturing their 3D printers, PayPal seemed unmoved:

“During a recent review of your PayPal account, we determined that it was appropriate to apply a reserve to your account effective in 24 hours. A collateral amount of $80,000.00 will be set aside from your current available balance. In addition, a rolling reserve will be set at 55% of the processed amount for each day, to be held for a 180 day rolling period.

 

For example, 55% of the payments you receive are held at the end of the first day and will be released 20/04/2016, 55% of your payments are held at the end of the second day and will be released on 18/10/2016, and so on.”

gizmoaniIt should go without saying that a delay of this length would destroy any hope that Gizmo 3D Printers would be able to meet their promised September ship dates. If those early dates are missed, then it would push the entire production back months. But it turns out that not having access to their funding could also end up dragging the entire company down with it. The company is currently working on obtaining a patent for its ultra-fast DLP 3D printing technology and is expected to pay $10,000 in less than a month. Without the funds that they raised on Indiegogo, it is unlikely that they will be able to make that payment.

Naturally losing out on the ability to patent their technology would be devastating, especially if someone else swoops in and lays claim to all of the work that du Toit has done. The sad irony here is that the very reasons that PayPal gave Gizmo 3D Printers for freezing their account will most certainly happen thanks to PayPal freezing their account:

“Delivery Timeframe – (Extended length of your delivery timeframe).  

 

Overall processing volume – (There is a significant change in the level of payments your business is processing compared to your processing history).  

 

High risk business model – (There has been a change in your business model or your business model is considered high risk due to one, or a combination of the following (list is not all inclusive) – how and when items or service are delivered, item or service being sold, inventory management).”

The extended delivery time frame, the increase in funds deposited into the account and the risky business model are all shared by any crowdfunding campaign, so it shouldn’t be out of the ordinary for Gizmo 3D Printers. Unfortunately, as anyone who has dealt with PayPal can tell you, du Toit hasn’t had a lot of luck talking to anyone at the company who can help him. He hasn’t even found someone who can provide clearer details on why exactly the funds are being held back in reserve or how long it will take them to review the case.

“I spoke to PayPal call center staff that all gave me the same answer – that someone is looking at the case. I then tried contacting PayPal employees directly on LinkedIn, hoping to get hold of a decision maker. They responded saying that they will get someone to email me. Someone emailed saying they are looking at the case and the next email I received after that was the one stating that the money is now reserved. I then contacted the Australian Financial Ombudsman as recommended by PayPal’s terms and conditions and any contact I had with any PayPal staff after that ended in them saying that they couldn’t talk to me any further about it as it is now a legal matter,” du Toit told me via email.

PayPal LogoGizmo 3D Printers and du Toit have officially registered a dispute against PayPal with the Financial Ombudsman of Australia, and they have received a case number. PayPal has 21 days to officially respond to the case. Sadly there is no time frame available to du Toit in regards to his claim against PayPal, and until the Ombudsman has made his ruling Gizmo 3D Printers remains in limbo. The company is looking for ways around the hold up, including refunding the PayPal funds and replacing them with direct bank transfers, however they can’t do anything until their dispute has been addressed.

This isn’t the first time that PayPal has decided that a company raising money from a crowdfunding website is risky so they find a need to place a hold on the funds. It actually turns out that they have been known to simply block Indiegogo campaigns entirely. While no one could begrudge PayPal from wanting to prevent their customers losing money on risky businesses, someone should probably point out to them that businesses become a lot more risky when they have their money held up and denied to them. We’ll keep you updated on the progress of this case, however you can also check out the Gizmo Indiegogo page for regular updates. What do you think of this action by PayPal? Discuss in the Gizmo Indiegogo Funds Frozen forum over at 3DPB.com.

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