Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 1 of 30 PageID #:1
`
`RECEIVED
`LK
`2/14/2022
`IN THE UNITED STATES DISTRICT COURT
`THOMAS G. BRUTON
`CLERK, U.S. DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`VIVEK SHAH,
`Plaintiff,
`
`v.
`
`PAYPAL, INC., and DANIEL H.
`SCHULMAN,
`Defendants.
`
`1:22-CV-00795
`Civil Action No . _____________________
`JUDGE NORGLE
`
`MAGISTRATE JUDGE HARJANI
`RANDOM
`
`VERIFIED COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`Plaintiff VIVEK SHAH alleges for his Verified Complaint against Defendants PAYPAL,
`
`INC. and DANIEL H. SCHULMAN, based upon personal knowledge as to himself and his own
`
`acts and experiences, and, as to other matters, upon information and belief, as follows:
`
`PRELIMINARY STATEMENT
`
`1.
`
`If it looks like a duck, swims like a duck, and quacks like a duck, then it probably
`
`is a duck.
`
`2.
`
`To receive deposits in the United States, a bank must be chartered or be given
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`permission to operate by the federal or a state government. 12 U.S.C. § 378(a)(2). For over two
`
`decades, Defendant PayPal, Inc. (“PayPal”) has been engaging in unlawful taking of deposits by
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`an entity not regulated as a bank and that it, in essence, was illegally operating as an unlicensed
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`bank in violation of the criminal provisions of the Glass-Steagall Act. The transmission of such
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`criminally derived deposits, in turn, violate 18 U.S.C. §§ 1956(c)(3)(A) and 1960(a), since
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`PayPal is an unlicensed money transmitting business, as defined by the federal law; violations of
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`which form the predicate acts of racketeering activity under the Racketeering Influenced and
`
`Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1961 et seq.
`
`1
`
`
`
`RECEIVED
`LK
`2/14/2022
`IN THE UNITED STATES DISTRICT COURT
`THOMAS G. BRUTON
`CLERK, U.S. DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`VIVEK SHAH,
`Plaintiff,
`
`v.
`
`PAYPAL, INC., and DANIEL H.
`SCHULMAN,
`Defendants.
`
`1:22-CV-00795
`Civil Action No . _____________________
`JUDGE NORGLE
`
`MAGISTRATE JUDGE HARJANI
`RANDOM
`
`VERIFIED COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`Plaintiff VIVEK SHAH alleges for his Verified Complaint against Defendants PAYPAL,
`
`INC. and DANIEL H. SCHULMAN, based upon personal knowledge as to himself and his own
`
`acts and experiences, and, as to other matters, upon information and belief, as follows:
`
`PRELIMINARY STATEMENT
`
`1.
`
`If it looks like a duck, swims like a duck, and quacks like a duck, then it probably
`
`is a duck.
`
`2.
`
`To receive deposits in the United States, a bank must be chartered or be given
`
`permission to operate by the federal or a state government. 12 U.S.C. § 378(a)(2). For over two
`
`decades, Defendant PayPal, Inc. (“PayPal”) has been engaging in unlawful taking of deposits by
`
`an entity not regulated as a bank and that it, in essence, was illegally operating as an unlicensed
`
`bank in violation of the criminal provisions of the Glass-Steagall Act. The transmission of such
`
`criminally derived deposits, in turn, violate 18 U.S.C. §§ 1956(c)(3)(A) and 1960(a), since
`
`PayPal is an unlicensed money transmitting business, as defined by the federal law; violations of
`
`which form the predicate acts of racketeering activity under the Racketeering Influenced and
`
`Corrupt Organizations (“RICO”) Act, 18 U.S.C. § 1961 et seq.
`
`1
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`
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`Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 2 of 30 PageID #:2
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`3.
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`This action stems from Defendants’ widespread business practice of unilaterally
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`seizing funds from its clients’ financial accounts, without cause and without any fair or due
`
`process.
`
`4.
`
`PayPal places a "hold" on Plaintiff's own funds in his own PayPal account. PayPal
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`has failed to inform him of the reason(s) for the actions it has taken and denying Plaintiff access
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`to his own money.
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`5.
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`PayPal excuses its unlawful seizure based on an alleged violation of its
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`Acceptable Use Policy (“AUP”)1 without stating in what way Plaintiff’s use of his PayPal
`
`account violates the AUP.
`
`6.
`
`PayPal’s application of an unlawful and unenforceable liquidated damages clause,
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`which is a contract of adhesion, without any causal connection to any damages PayPal actually
`
`suffered, as a justification for its wholesale seizure of the entire balance of Plaintiff’s PayPal
`
`account, and transferring said balance to PayPal’s own account, for PayPal’s own use, is
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`inequitable and unconscionable, amounting to nothing less than a conversion of funds which do
`
`not belong to PayPal. Moreover, PayPal then blatantly invests the money and earns interest on it.
`
`7.
`
`Defendants operate the immensely popular PayPal online payment platform. As
`
`part of this platform, users such as Plaintiff maintain account balances which includes funds the
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`users have deposited into the PayPal platform as well as money sent to the users by customers
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`and other users. These funds belong to the users, not Defendants.
`
`8.
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`Nevertheless, Defendants have adopted a business practice of unilaterally seizing
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`some or all of its users’ funds when Defendants merely suspect the user in question violated
`
`
`1 https://www.paypal.com/us/webapps/mpp/ua/acceptableuse-full
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`
`
`2
`
`
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`Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 3 of 30 PageID #:3
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`Defendants’ AUP, which is a set of restrictions Defendants place on certain transactions made
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`through the PayPal platform.
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`9.
`
`Upon information and belief, Defendants seizes these funds without first
`
`obtaining any conclusive determination of actual breaches by the users of the AUP – indeed,
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`Defendants do so without even conducting a reasonable investigation to determine whether any
`
`violation occurred.
`
`10.
`
`Rather, Defendants have adopted a business policy of “shooting first and asking
`
`questions later” – taking the money for itself and only afterwards, and occasionally, interacting
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`with the users to determine whether the seizure was appropriate.
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`11. Moreover, the amounts that Defendants seize bear no relationship to any actual
`
`damages suffered by them. Rather, Defendants arbitrarily seize amounts based on a liquidated
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`damages provision buried in their User Agreement which has no connection to the actual
`
`damages suffered by them – indeed, which is often used where Defendants have suffered no
`
`damages whatsoever.
`
`12.
`
`The Agreement requires PayPal to, at a minimum, provide notice to such users of
`
`any hold placed on their accounts that includes both the reason for the hold and an opportunity to
`
`request restoration of access to the held funds. PayPal's "notice" falls far short of what is
`
`required. As a result, Plaintiff has no idea why his money was "held" by PayPal.
`
`13.
`
`PayPal often seizes the money permanently after the 180-day hold period ends,
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`without notice and without explanation.
`
`14.
`
`PayPal’s User Agreement and AUP cannot be used as a “license to steal.”
`
`15. Most egregious of all, Defendants criminally receive deposits from its customers
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`in the first place.
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`3
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`16.
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`Plaintiff, proceeding pro se, brings this suit against Defendants under the civil
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`remedies provided by RICO and the Illinois Consumer Fraud and Deceptive Business Practices
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`Act (“CFA”) to redress the harm Plaintiff has suffered as a direct result of Defendants’ conduct.
`
`17.
`
`Plaintiff seeks injunctive, monetary, and declaratory relief against Defendants for
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`engaging in illegal banking, operating an unlicensed money transmitting business, laundering
`
`money, and deceptive business practices.
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`PARTIES
`
`18.
`
`Plaintiff Vivek Shah is a citizen of the United States and a resident of the State of
`
`Illinois. His principal place of residence is 236 Woburn Ln, Schaumburg, IL 60173.
`
`19.
`
`PayPal, Inc. is an American multinational financial technology company
`
`operating an online payments system in most countries that support online money transfers and
`
`serves as an electronic alternative to traditional paper methods such as checks and money orders.
`
`The company operates as a payment processor for online vendors, auction sites and many other
`
`commercial users, for which it charges a fee. Its parent company, PayPal Holdings, Inc. (“PayPal
`
`Holdings”), is a publicly traded company listed on the NASDAQ. Its headquarters are located at
`
`2211 N 1st St, San Jose, CA 95131 and is registered to do business in Illinois as a foreign
`
`corporation with the Secretary of State.
`
`20.
`
`Daniel H. Schulman (“Schulman”) is the president and Chief Executive Officer
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`(“CEO”) of PayPal and PayPal Holdings. He has held this position since around 2014. He is
`
`responsible for managing PayPal’s overall operations, including, but not limited to, delegating
`
`and directing agendas, driving profitability, managing its organizational structure, strategy, and
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`communicating with the board. His principal place of conducting business is 2211 N 1st St, San
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`Jose, CA 95131.
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`
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`4
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`21.
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`In acting or omitting to act as alleged herein, PayPal was acting through its
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`employees and/or agents and is liable on the basis of the acts and omissions of its employees
`
`and/or agents.
`
`22.
`
`In acting or omitting to act as alleged herein, each employee, officer or agent of
`
`PayPal was acting in the course and scope of his or her actual or apparent authority pursuant to
`
`such agencies, or the alleged acts or omissions of each employee or officer as agent were
`
`subsequently ratified and adopted by PayPal as principal.
`
`JURISDICTION AND VENUE
`
`23.
`
`This Court has subject-matter jurisdiction over this action under 18 U.S.C.
`
`§ 1964, 28 U.S.C. § 1331 and 28 U.S.C. § 1367.
`
`24.
`
`This Court has supplemental jurisdiction over the state laws claim in this action
`
`under 28 U.S.C. § 1367(a) because it is also related to the federal claims asserted against PayPal
`
`so that it forms part of the same case or controversy under Article III of the U.S. Constitution.
`
`25.
`
`This Court has authority to grant declaratory and injunctive relief under 28 U.S.C.
`
`§§ 2201 and 2202 and Rule 57 of the Fed. Rules of Civ. P.
`
`26.
`
`Venue is proper in this district under to 18 U.S.C. § 1965 and 28 U.S.C. § 1391(b)
`
`because Defendants are subject to personal jurisdiction in this judicial district and the Defendants
`
`conduct substantial business in this district. PayPal is registered as a foreign corporation to do
`
`business in the State of Illinois. Schulman has agents through which he conducts his business
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`affairs in this district. Plaintiff is a resident of Schaumburg, IL.
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`
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`5
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`FACTUAL BACKGROUND
`
`I.
`
`PayPal’s Relevant Products and Business Model
`
`27. More than 300 million people and businesses worldwide use PayPal to send
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`money, receive money and shop online. Along with digital payments, PayPal offers other
`
`financial services like debit cards, prepaid cards, credit cards and lines of credit.
`
`28.
`
`PayPal’s platform is comprised of payment solutions, including core PayPal,
`
`PayPal Credit, Braintree, Venmo, Xoom, iZettle, and Hyperwallet. It generates revenue through
`
`charging fees on payment transactions it completes for its customers, investing the deposits it
`
`receives from its customers, and through other services.
`
`29.
`
`PayPal charges net transaction fees to merchants and consumers for each
`
`transaction completed on its payments platform. The magnitude of the fee is based on the volume
`
`of activity. Fees are also charged on currency conversions, cross-border transactions, fund
`
`transfers from customers' PayPal or Venmo accounts to their debit cards or bank accounts, and
`
`other miscellaneous fees.
`
`30.
`
`PayPal generates revenues through partnerships, referral fees, subscription fees,
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`gateway fees, and services offered to merchants and consumers. It also earns interest and fees on
`
`its portfolio of loan receivables, as well as interest on certain assets underlying customer
`
`balances.
`
`31.
`
`PayPal can be directly connected to the user’s bank or credit card account from
`
`which money is then retrieved or transferred.
`
`32.
`
`PayPal Business Debit Mastercard. PayPal account holders may apply for a
`
`PayPal Business Debit Mastercard (“Business Debit Card”), which works like a debit card, but
`
`instead of drawing from a bank account, it draws from the cash balance in the user’s PayPal
`
`
`
`6
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`account. This allows account holders to spend funds that are in their PayPal account without
`
`being required to transfer them from their bank account first.
`
`33.
`
`The Business Debit Card offers overdraw protection if users have insufficient
`
`funds in their PayPal account and have designated a backup payment source for their card.
`
`Backup funding sources can include a confirmed bank account, among others.
`
`34.
`
`To be considered for a PayPal Business Debit Mastercard, a customer must have a
`
`PayPal Business or PayPal Balance account to maintain and use a PayPal balance.
`
`35.
`
`According to the PayPal Business Debit Mastercard Cardholder Agreement, a
`
`“’PayPal Account’ means your account in which you hold or store value and from which you
`
`access for use via the Debit Card and is the record we maintain to account for the value of claims
`
`associated with the Debit Card.”2
`
`36.
`
`According to PayPal’s own marketing video, the Business Debit Card offers its
`
`users 1% cash back, which is “deposited weekly into [the user’s] PayPal balance.”3
`
`37.
`
`PayPal Balance Account. A balance or a Balance Account is much like a bank
`
`balance. It is a place where account holders store money. Account holders can deposit and
`
`withdraw money from it. Opening a Balance Account allows users to hold a balance, and use the
`
`balance to send and receive money, buy things online using mobile devices or in stores, and
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`make payments, among other benefits. Users can only open a Balance Account if they have a
`
`personal PayPal account in good standing and can only use a Balance Account by accessing it
`
`through their personal PayPal account.
`
`38. Money held in a Balance Account represents an unsecured claim against PayPal
`
`and is not insured by the Federal Deposit Insurance Corporation (“FDIC”).
`
`
`2 https://www.paypal.com/us/webapps/mpp/ua/debitcard-full
`3 https://www.youtube.com/watch?v=TxdhvV0Mu8M
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`7
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`39.
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`The available features of a Balance Account include:
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`a. Receive money;
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`b. Hold money;
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`c. Convert money from one currency to another;
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`d. Withdraw money from a Balance Account to a debit card or bank account linked
`
`to a personal PayPal account;
`
`e. Transfer money for purchases of goods and services;
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`f. Send money to friends and family;
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`g. Buy, sell, and hold certain cryptocurrencies if eligible;
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`h. Make in-store purchases using a PayPal-branded debit card linked to a Balance
`
`Account;
`
`i. Add or withdraw money at ATMs using a PayPal-branded debit card;
`
`j. Transfer money to and withdraw money from PayPal Savings;
`
`k. Set up Direct Deposit of funds into a Balance Account;
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`l. Load cash into and withdraw funds from a Balance Account at several retail
`
`stores throughout the U.S.; and
`
`m. Transfer proceeds from checks into a Balance Account using its remote check
`
`capture feature.
`
`40.
`
`Users may transfer money into their Balance Account from any bank account
`
`linked to their personal PayPal account by requesting an electronic transfer from their bank
`
`account.
`
`41.
`
`Users can load funds into their Balance Account at retail stores or they can load
`
`funds into it using the remote check capture feature.
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`8
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`42.
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`Users may arrange to have all or part of their paycheck or any federal or state
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`government benefit or payment (e.g., Federal tax refunds or Social Security payment) transferred
`
`directly into their Balance Account by their employer or government payer, as applicable, by
`
`using the Direct Deposit feature. Funds added to users’ accounts via Direct Deposit are
`
`transferred to and held by Wells Fargo Bank, N.A. (“Wells Fargo”) where they are eligible for
`
`FDIC pass-through insurance.
`
`43.
`
`44.
`
`Any balance in a Balance Account represents an unsecured claim against PayPal.
`
`If a Balance Account is eligible for FDIC pass-through insurance, PayPal holds
`
`these funds as the agent and custodian and is the ultimate beneficial owner of the funds. PayPal
`
`deposits funds into one or more custodial accounts it maintains for the benefit of eligible Balance
`
`Account holders at one or more FDIC-insured banks (currently Wells Fargo). PayPal customer
`
`funds in these custodial accounts are eligible for pass-through FDIC insurance coverage.
`
`45.
`
`If a Balance Account is not eligible for FDIC pass-through insurance, PayPal
`
`combines the Balance Account balance with the balances of other Balance Account holders and
`
`invests those funds in liquid investments in accordance with state money transmitter laws.
`
`PayPal owns the interest or other earnings on these investments. However, the claim against
`
`PayPal represented by the balance held in the Balance Account is not secured by these
`
`investments and customers do not have any ownership interest (either legal or beneficial) in these
`
`investments. These pooled amounts are held apart from PayPal’s corporate funds, and PayPal
`
`neither uses these funds for its operating expenses or any other corporate purposes nor does it
`
`voluntarily make these funds available to its creditors in the event of bankruptcy.
`
`
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`9
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`46.
`
`As security for the performance of customers’ obligations under PayPal’s User
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`Agreement, customers are required to grant PayPal a lien on, and security interest in and to,
`
`funds held in their PayPal account.
`
`47.
`
`PayPal offers two different Balance Account types: personal PayPal accounts for
`
`personal use and PayPal business accounts for business use.
`
`48.
`
`Personal PayPal Accounts. Money sent to a personal PayPal account cannot be
`
`held as a balance in a personal PayPal account. A user must open a Balance Account to hold the
`
`money as a balance in their Balance Account for purchases or to transfer funds to friends and
`
`family members. A Balance Account is separate account from a personal PayPal account. If a
`
`user opens a Balance Account, PayPal automatically links the Balance Account to the personal
`
`PayPal account.
`
`49.
`
`In or around March 2019, PayPal introduced PayPal Cash ("Cash") and PayPal
`
`Cash Plus ("Cash Plus") accounts for personal PayPal users. These accounts are designed as a
`
`place within PayPal where users can store money. PayPal automatically opened a Cash account
`
`for all active accounts created before March 2019. Cash and Cash Plus accounts are Balance
`
`Accounts.
`
`50.
`
`PayPal Cash Card (“Cash Card”) is a contactless debit Mastercard that connects to
`
`users’ PayPal balance so that they could make purchases and withdraw/load cash from their
`
`linked account. A PayPal Cash Plus account is required in order to get the card.
`
`51.
`
`The Cash Card lets users use their PayPal balance to spend money online or in
`
`stores, wherever Mastercard is accepted, just like a bank account with a debit card. Users can
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`also use this card to withdraw cash, fee-free, at more than 33,000 MoneyPass ATMs worldwide.
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`10
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`52.
`
`Any Personal user can change their account type to a Business Account and vice
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`versa.
`
`53.
`
`PayPal Business Account. A PayPal Business Account is an account that includes
`
`most of the features of the personal PayPal account, and additionally lets users accept payments
`
`and gives them access to eCommerce and Point of Sale (“POS”) integrations, online invoicing, a
`
`virtual terminal, recurring billing, and more.
`
`54. Money sent to a PayPal Business Account can be held directly as balance in the
`
`PayPal Business Account.
`
`55.
`
`Any balance held in a PayPal Business Account represents an unsecured claim
`
`against PayPal and is not insured by the Federal Deposit Insurance Corporation (FDIC).
`
`56.
`
`PayPal Savings is a deposit account provided by Synchrony Bank in which users
`
`can deposit funds and subsequently access those funds by transferring them to a Balance
`
`Account. A PayPal Balance Account is required to set up and utilize PayPal Savings. All
`
`deposits to and withdrawals from PayPal Savings are made via transfer to a Balance Account.
`
`57.
`
`PayPal Working Capital is a business loan with one fixed fee, which is then
`
`repaid using a percentage of the business’s future PayPal sales. Repayments continue in this way
`
`until the amount borrowed, plus the fee, is paid off in full. There are no interest rates or early
`
`repayment fees.
`
`58.
`
`PayPal Business Loan provides businesses capital to grow by borrowing
`
`anywhere from $5,000 to $500,000.
`
`59.
`
`PayPal Credit, in partnership with Synchrony Bank, offers education financing to
`
`students attending more than 150 career-training schools.
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`11
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`II.
`
`Venmo
`
`60.
`
`Apart from PayPal’s core business as stated in the preceding paragraphs, PayPal
`
`also owns and operates a separate business and product known as “Venmo.”
`
`61.
`
`Venmo was aimed at friends and family who wish to split bills, e.g. for movies,
`
`dinner, rent, or event tickets. Account holders can transfer funds to others via a mobile phone
`
`app; both the sender and receiver must live in the United States. Venmo handled $159 billion in
`
`transactions in the first quarter of 2018.
`
`62.
`
`Users can create an account via Venmo’s mobile app or website and provide basic
`
`information and bank account information. One must have a valid email address and an
`
`American mobile phone number to use Venmo. Recipients of transactions can be found via
`
`phone number, Venmo username, or email.
`
`63.
`
`Users have a Venmo balance that is used for their transactions. They can link their
`
`bank accounts, debit cards, or credit cards, to their Venmo account. If a user does not have
`
`enough funds in the account when making a transaction, it will automatically withdraw the
`
`necessary funds from the registered bank account or card.
`
`64.
`
`Venmo users add funds to their accounts for storage and safekeeping.
`
`III.
`
`PayPal’s Relevant Conduct Leading to the Instant Suit
`
`65.
`
`66.
`
`In or around 2005, Plaintiff opened a PayPal Personal account.4
`
`In or around 2006, Plaintiff upgraded his personal account to a Balance Account.5
`
`Plaintiff was also approved for a Business Debit Card.6
`
`67.
`
`In or around 2016 the Business Debit Card expired.
`
`
`4 Or a similar product offering with a different product name at the time.
`5 Or a similar product offering with a different product name at the time.
`6 Or a similar product offering with a different product name at the time.
`
`
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`12
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`68.
`
`In or around January 2019, Plaintiff started working as a driver for Uber and Lyft
`
`in the Chicago metropolitan area.
`
`69.
`
`On or around April 4, 2019, the balance in the account was automatically
`
`converted to a PayPal Cash Plus account and was linked to the personal PayPal account.
`
`70.
`
`71.
`
`On or around May 14, 2019, Plaintiff was issued a PayPal Cash Card.
`
`On or around May 14, 2019, Plaintiff requested the PayPal Cash Card to be closed
`
`and that a PayPal Business Debit Mastercard be issued.
`
`72.
`
`On or around May 14, 2019, Plaintiff was approved for a PayPal Business Debit
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`Mastercard. The PayPal Cash Card was closed.
`
`73.
`
`On December 23, 2019, Plaintiff sold an item on eBay. The buyer of the item paid
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`a total of $109.15 for the item to Plaintiff by means of PayPal.
`
`74.
`
`In or around January 2020, Plaintiff rented an apartment in Los Angeles, CA to
`
`restart his career as an actor. He signed contracts with a theatrical agency for representation for
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`film and television work, a commercial agency for commercial work, and a manager to oversee
`
`his career as an actor.
`
`75.
`
`On January 28, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on January 31, 2020.
`
`76.
`
`On January 31, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 5, 2020.
`
`
`
`13
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`
`
`Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 14 of 30 PageID #:14
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`77.
`
`On January 31, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 5, 2020.
`
`78.
`
`On January 31, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 5, 2020.
`
`79.
`
`On January 31, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 5, 2020.
`
`80.
`
`On January 31, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 5, 2020.
`
`81.
`
`On January 31, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 6, 2020.
`
`82.
`
`On February 3, 2020, Plaintiff requested PayPal to transfer $200.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 7, 2020.
`
`83.
`
`On February 3, 2020, Plaintiff requested PayPal to transfer $500.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 7, 2020.
`
`
`
`14
`
`
`
`Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 15 of 30 PageID #:15
`
`84.
`
`On February 3, 2020, Plaintiff requested PayPal to transfer $500.00 to his Balance
`
`Account from his personal bank account. These funds were successfully transferred and posted
`
`to the Balance Account on February 7, 2020.
`
`85.
`
`On February 4, 2020, without any prior notice to Plaintiff, PayPal permanently
`
`limited his account and froze all funds, totaling $3,332.86.
`
`86.
`
`On February 4, 2020, Plaintiff contacted PayPal’s customer service to inquire
`
`about the limitation. The PayPal customer service stated that she did not have any information as
`
`to why the account was limited, other than a violation of the AUP. Plaintiff pressed the customer
`
`service representative further by asking what specifically in the AUP was violated to which the
`
`representative responded that she did not have that type of information. Plaintiff then asked her
`
`who would have that information, to which she stated that their legal department might. Plaintiff
`
`was also notified that his funds will be frozen for up to 180 days.
`
`87.
`
`On or around February 9, 2020 Plaintiff again contacted PayPal’s customer
`
`service to inquire about the limitation, to which he received the same responses as stated above.
`
`88.
`
`On February 10, 2020 Plaintiff sent a Demand Letter to PayPal’s Legal
`
`Department requesting more information as to restore full access to his account.
`
`89.
`
`On February 15, 2020, Plaintiff received a response to his Demand Letter through
`
`Customer Service, stating that the AUP had been violated, without providing any details about
`
`which particular section(s) or subsection(s), and which transactions(s) in the account were to be
`
`deemed a violation of the AUP. Plaintiff responded to this response with the reply of yet again
`
`asking for the particulars of the AUP violation and transaction(s) involved.
`
`
`
`15
`
`
`
`Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 16 of 30 PageID #:16
`
`90.
`
`On February 21, 2020, due his inability to meet his daily financial needs, Plaintiff
`
`filed a suit against PayPal in the Superior Court of the State of California, for the County of Los
`
`Angeles, Case No. 20STLC01718.
`
`91.
`
`On March 24, 2020, due to the global pandemic shutting down nearly all demand
`
`for Uber and Lyft rides, and having no other source of income, Plaintiff was forced to leave the
`
`State of California and relocated to Illinois to live with his parents. Had Plaintiff had access to
`
`his life savings that he had kept in his PayPal account, he would have utilized the money to pay
`
`for rent, food, and other basic necessities until he found another source of income or filed for
`
`unemployment. PayPal’s withholding of $3,332.86 accounted for over 90% of Plaintiff’s liquid
`
`assets.
`
`92.
`
`In or around April 2020, Plaintiff sent an electronic message to PayPal’s
`
`Customer Service through its online messaging portal, informing PayPal that due to the global
`
`pandemic he was being dislocated since nearly all of his liquid money that he possessed was
`
`being held by PayPal. Plaintiff plead to PayPal’s customer service to return him his life savings.
`
`No response was ever provided by PayPal.
`
`93.
`
`On August 2, 2020, after 180 days of withholding funds, PayPal transferred
`
`Plaintiff’s funds totaling $3,332.86 to his linked bank account.
`
`94.
`
`On December 23, 2021, Plaintiff requested dismissal of Case No. 20STLC01718,
`
`primarily due the extremely congested dockets in California state courts. Additionally, PayPal
`
`had failed to appear. The dismissal was entered as requested on January 5, 2022.
`
`95.
`
`From in or around 2005 to 2020, Plaintiff engaged in thousands of transactions for
`
`various products offered by PayPal, including its check cashing services, depositing and
`
`withdrawing thousands of dollars.
`
`
`
`16
`
`
`
`Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 17 of 30 PageID #:17
`
`96.
`
`At all relevant times, Plaintiff kept his money in his PayPal account for
`
`safekeeping and as a primary means to store money and pay for his daily expenses.
`
`97.
`
`Upon information and belief, PayPal regularly engages in the practice of holding
`
`funds of its customers for up to 180 days. See, e.g., “PayPal stole my money for 180 days then
`
`confiscated when 180 days were up,”7 “180 days hold!!,”8 and “PAYPAL IS HOLDING MY
`
`$53,832.05 HOSTAGE FOR 180 DAYS.”9
`
`IV.
`
`Facts Common to All RICO Claims
`
`98.
`
`Defendant Schulman is a “person” as that term is defined in 18 USC § 1961(3)
`
`because he is an individual capable of holding a legal or beneficial interest in property.
`
`99.
`
`PayPal is an “enterprise” as that term is defined in 18 USC § 1961(4) because it is
`
`a corporation.
`
`100. The predicate acts stated herein all occurred after the effective date of RICO and
`
`more than two such acts occurred within ten years of one another.
`
`101. The enterprise alleged herein also engaged in legitimate business activities
`
`beyond those necessary to carry out the alleged acts of racketeering.
`
`102. Since August 2000, PayPal has processed all of its deposits through Wells Fargo.
`
`Wells Fargo also provides other services to PayPal, including wire transfers, check printing,
`
`mailing and reconciling as well as fraud protection. Under the terms of their contract governing
`
`their relationship, neither party has given the other exclusivity in terms of services. In general,
`
`PayPal pays a transaction fee for each ACH and check transaction processed by Wells Fargo.
`
`
`7 https://www.paypal-community.com/t5/Security-and-Fraud/PayPal-stole-my-money-for-180-days-then-
`confiscated-when-180/m-p/2714487
`8 https://www.paypal-community.com/t5/Security-and-Fraud/180-days-hold/td-p/1530288
`9 https://www.paypal-community.com/t5/Disputes-and-Limitations/PAYPAL-IS-HOLDING-MY-53-832-05-HOSTAGE-
`FOR-180-DAYS/td-p/2512969
`
`
`
`17
`
`
`
`Case: 1:22-cv-00795 Document #: 1 Filed: 02/14/22 Page 18 of 30 PageID #:18
`
`Pricing is schedule-based, depending on several factors, including domestic or international
`
`location, the total volume of payments and other factors.
`
`103. Upon information and belief, PayPal stores all of its customers’ Balance Account
`
`funds into an account at Wells Fargo and maintains accounts and can move the funds to custodial
`
`accounts at other such federal or state-chartered banks unknown to Plaintiff but chosen by
`
`PayPal at any time and without notice.
`
`Non-Party Co-Conspirators
`
`104. Aaron Karczmer is an Executive Vice President of PayPal’s Risk, Platforms and
`
`Legal organization. In this role, Karczmer oversees a diverse set of business areas, including
`
`control functions, front-line risk and operations teams, and core platforms and services. Control
`
`functions include the Chief Risk and Compliance Officer’s organization, the General Counsel’s
`
`organization, and the Corporate Secretary’s organization. Front-line teams have global
`
`operational and policy responsibility for managing fraud, brand and seller risk, and collections.
`
`Front-line teams are also responsible for fulfilling PayPal’s commitment to combat money
`
`laundering, terrorism financing, and human trafficking. Core platforms and services teams are
`
`responsible for company-wide platform capabilities and developing early-stage business units, as
`
`well as the service externalization engine for PayPal through Platform-as-a-Service offerings.
`
`105. Peggy Alford is an Executive Vice President of Global Sales at PayPal. Alford
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`oversees the global sales and distribution of PayPal's products and services and leads the
`
`Customer Success and Go-to-
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