Jack Dorsey’s Bitcoin-Friendly Square Accused of Unfairly Withholding 30% Of Customers’ Funds

Crypto-friendly payments company Square recently started withholding a significant portion of its clients’ money as businesses continue to struggle to stay afloat in the ongoing pandemic, mainstream media reported.

The firm, led by Bitcoin enthusiast and Twitter founder Jack Dorsey, said in its announcement on Tuesday that the move is an effort to protect them against “risky” transactions and customers who demanded refunds after payment.

“We apply reserves on more ‘risky’ sellers, such as those that take prepayment for goods or services delivered at a future date, sell goods or services more prone to disputes, or operate in an industry that historically receives higher chargeback rates than others,” Square wrote.

Square Withholding As Much As 30%

The San Francisco-based company described the program as a “rolling reserve” policy and will hold back between 20 to 30 percent of its clients’ money. The firm told its customers that it would release the withheld portion on a “rolling basis” that could last up to four months.

Square claimed it introduced the initiative in late 2019 but extended it as the economy started facing turbulent times due to the pandemic.

The firm claimed only about 0.3% of all its millions of customers were affected by the practice. However, retailers are not happy and have started complaining about the move. Withholding that much from small businesses that are already struggling means more frustration. Some startups have been forced to downsize their workforce as well as take out loans to survive.

Jesse Larsen, the owner of PennyWise Contracting, a construction company, said that Square started holding 30% of every transaction he made on the platform since early May. Larsen has thousands of dollars locked with the payments company, which has affected his business operations.

“It may not be the coronavirus that puts us out of business but actually the greed of Square that breaks the camel’s back,” Larsen said.

No Red Flags

The New York Times reported that documents provided by some of the affected retailers about their trading activities had no red flags or risky transactions as described by Square.

Merchants believe the company is only trying to fill its losses since Square suffered the most in the pandemic-induced lockdown compared to other technology-focused payment companies like PayPal.

“Square was unfairly keeping money from them at an economically vulnerable time to protect its own bottom line,” NYT wrote, quoting some of the unhappy customers.

More than 1,600 small businesses have already signed an online petition asking the company to end its policy.

Featured image courtesy of Medium