Dwolla and its executives have been named in a federal lawsuit seeking $2 million in damages and alleging nine different offenses, including racketeering, false advertising, breach of contract and intentional misrepresentation.
TradeHill, a web-based currency exchanger based in San francisco bay area and Chile, filed the 19-page lawsuit Monday. It names CEO Ben Milne and COO Charise Flynn, along with the company and five other undetermined defendants, and was filed inside a northern California court.
Dwolla is often a low-fee online payment service that has quickly become just about the most visible and successful tech firms in Des Moines. The lawsuit alleges that Milne, Flynn and five others knowingly misrepresented the Des Moines-based company’s services, specifically its are convinced that this hadn’t “chargeback” to merchants understanding that its transactions were “as good as cash.”
A chargeback, or “reversal,” is used by financial institutions to guard customers from fraudulent merchants. If customers complain for their financial institution that they didn’t receive offerings, the transfer is reversed and funds is returned.
During a two-month period that ended July 27, TradeHill directed users to Dwolla like a payment method. However, some customers paid using Dwolla, used TradeHill’s services, then contacted their finance institutions to demand a chargeback of those funds from Dwolla, the lawsuit says. A part of the lawsuit places at fault on customers.
“Unbeknownst to TradeHill and Dwolla, many customers were using Dwolla for services from TradeHill for free,” the lawsuit states.
Instead of absorbing chargebacks, Dwolla passed them onto TradeHill by reversing transactions within TradeHill’s account without any notice, in accordance with the lawsuit. Also, the lawsuit claims, Dwolla officials told Veridian Lending institution, which backs deposits in Dwolla, that TradeHill was obviously a fraudulent business.
In an announcement Tuesday, Dwolla spokesman Jordan Lampe said the corporation has not been served formal notice from the lawsuit but it would “vigorously defend all allegations of wrongdoing” in the court. Calling the allegations “specious,” Lampe said Dwolla’s ecosystem remains safe.
“If any merchant remains a resource of systemic fraud and we cannot arrived at a partnership, we will always make appropriate actions,” he was quoted saying.
The lawsuit said the defendants “devised a scheme,” namely false advertising and intentional misrepresentations on its site, to have TradeHill’s property by fraud. The scheme was transmitted over wire communications, which constitutes wire fraud, the suit alleges.
Also, the lawsuit says Dwolla blocked TradeHill from withdrawing $70,000 on July 25 “without justification.” TradeHill conducted about 10,000 Dwolla transactions worth greater than $2 million in the two-month period.


The demand for information grows day by day as the Internet revolution continues. As the World Wide Web expands we can sift through data electronically across a array of platforms too vast to experience. Numerous articles and reports tell that the Internet comprises approximately 1 million times 1 million documents and that our WWW agglomeration grows at a rate of one billion Web documents daily. While a huge quantity of Web pages disappears after large archives close (two examples include GeoCities and Vox), the mountain of online data continues unabated in its wild growth.

