Nonprofit Newswire | Burning Man Artists Burned by PayPal

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August 12, 2010; Source: San Francisco Bay Guardian | Imagine this scenario: you're packing up for an event for which you've put in months of effort, successfully fundraising hundreds of thousands of dollars, and word comes in that your access to that money has been cut off. A nightmare, no? The Flux Foundation found themselves in precisely this position earlier this week, when its funds were frozen just before the Burning Man festival by PayPal, citing the foundation's pending nonprofit status.

PayPal, an eBay-owned company, handles financial transactions—in this case donations to supplement foundation funding. The company is tight-lipped, so the particulars of this financial debacle come from the Flux Foundation and embedded journalists along for the ride to the Burning Man festival, where Flux was making preparations for an installation.

As is a common and legal practice, the Flux Foundation had filed for nonprofit status, and was operating as a nonprofit while awaiting state and federal approval. PayPal, lacking official documentation of the Foundation's certification, denied Flux's withdrawal requests, attempting to hold on to, and profit from the funds until the paperwork came in. Meanwhile, Flux loaded up their trucks to depart and made an emergency plea for funds.

Fortunately for Flux, PayPal quickly grew wary of the bad press the freeze had generated, and agreed yesterday to release the funds. PayPal then canceled the Flux Foundation account, and Flux moved their funds to WePay, in hopes of better financial management.—James David Morgan