Silicon Prairie News

As Bitcoin exchanges drop Dwolla, Milne says company stays focused

Des Moines July 27, 2011 by Danny Schreiber

As of Tuesday, Bitcoin exchange platform TradeHill is no longer accepting Dwolla, citing the occurrence of chargebacks as the reason for its decision.

Since TradeHill's launch in early June, it had been accepting Dwolla as a way for its users to fund their accounts in order to purchase Bitcoins, a virtual, peer-to-peer currency, on its exchange. According to the blog Bitcoin Money, Bitcoin exchanges, such as TradeHill, have chosen to use Dwolla for its competitive transaction fee (a flat 25 cents) and the understanding, which has now proven inaccurate, that Dwolla transfers are non-reversible.

This news concerning TradeHill, one of the top two Bitcoin exchanges — Mt. Gox is the other — comes less than one week after Dwolla reached its $1 million in transactions per day milestone, a portion of which can be credited to Dwolla's use in the Bitcoin market. "Given Bitcoin’s recent explosion," The Next Web's Brad McCarty wrote on Thursday, "it would stand to reason that at least part of Dwolla’s explosive growth is being caused by the ease of compatibility between it and the Bitcoin currency system."

According to a TradeHill blog post on Tuesday, TradeHill was one Dwolla's top two customers (Dwolla declined to comment on this fact), but now it is no longer.

"We have witnessed nine cases where a Dwolla payment we received (and credited) was reversed days or even weeks later," TradeHill wrote on Tuesday. In a post on Monday, TradeHill said a recent audit of transactions found losses of $37,000 due to reversals by Dwolla, meaning that TradeHill had administered Bitcoins to users after receiving a credit confirmation but then later learned that the Dwolla transaction had been reversed.

Regarding Dwolla's ability to reverse a transaction if a customer dispute is submitted, Dwolla CEO Ben Milne said: "At the end of the day, these processes have been in practice with these merchants — and (by) these merchants, I mean Dwolla merchants as a whole — for quite some time.

"And I think that the unfortunate side is that you know there's an air of uncertainty about Bitcoins as a whole, and I don't think this is probably any exception to that rule," Milne said. "But in this case we require written consent for a reason when [selling] certain goods, and we do retain the right and we always have retained the right to be able to arbitrate these types of disputes and be able to relay those disputes through financial institutions."

More than once, Milne stressed that Dwolla is committed to supporting "legitimate users, purchasing legitimate goods and services that they legitimately want." If a user has a dispute or issue with Dwolla, Milne said his support team can be reached by phone or email, the latter of which never goes unanswered.

Whether TradeHill's decision will lead to a domino effect amongst the Bitcoin trading platforms is yet to be seen. As of today, a second exchange,, has also stopped accepting Dwolla.

When asked what this means for the future of Dwolla, Milne said: "Moving forward, we have to continue to concentrate on our core clients, and we will." Those core clients include Dwolla's banking partners, such as recent FiSync sign up Financial Plus Credit Union, and a future 15 more banks that plan to offer FiSync.

To learn more about Dwolla and Bitcoin, see our post: "Bitcoin: What is it and how is Dwolla involved in its marketplace?" And a guest post by Ben Milne: "Guest Post: The virtual currency debate, exchange and hysteria".

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Dwolla better be really careful. It's top two consumers are MtGox and TradeHill. It is ironic. Dwolla is acting as an exchange for the world's first digital currency, which will ultimately kill Dwolla.

Already, there are tons of things that you can buy with bitcoins. Check out the live merchandise feeds at searchbitcoin or weusecoins. Bitcoin is taking off.

Jul 27, 2011 at 06:15 PM

Dwolla better read this thread:

Between deleted fagbook posts and lack of response, they aren't putting their best effort forward in resolving this mess. It would be in their best interests if they made some public announcement on the matter. Soon.

Jul 27, 2011 at 06:26 PM

I will never use Dwolla again. They intentionally tried to cover up their chargeback process. A company corrupted by its success.

Jul 27, 2011 at 06:55 PM

I don't think all exchanges had problems with Dwolla. Camp BX USA and Intersango UK are still accepting it.

Will be interesting to see if TradeHill is lying about this?

Jul 27, 2011 at 08:07 PM
The Reality

EVERYONE knew Dwolla marketed NO CHARGEBACKS - that's why BTC exchanges used them - because they were ASSURED that CREDITTED meant CREDITTED. Tradehill and other investigators have Dwolla on tape saying NO CHARGEBACKS. There are also google caches that show they changed their Terms of Service on July 25th ( the day Tradehill went public )

He doesn’t even mention that Tradehill and other exchanges found an entirely different class of errors – transactions that just ‘vanished’ from past statements.

The community knows the truth, and they have voiced their opinions here:

Jul 27, 2011 at 08:13 PM

Ok - so if you are going to 'take back' transactions even though you falsely advertized that you wouldn't, then why didn't you even tell the merchants.

Tradehill asked you about certain transactions for TWO WEEKS and you didn't say “hey guys, those are in arbitration”; instead, you said "whatever is on the statement is correct"; but alas, the statements were changing daily with transactions appearing/disappearing and changing status WITHOUT notice to the merchant AT ALL!

You didn't tell the merchants cause the only reason they used your service was because you claimed NO CHARGEBACKS.

Jul 27, 2011 at 08:22 PM
Cold Spitteler

notice how the article is written by a friend of milne at a 'home town' news site of dwolla. I have tried to get my account closed, and they would only 'suspend' it. dwolla being the next paypal? they are certainly following paypal's lead with customer disrespect and fraudulent chargebacks.

Jul 27, 2011 at 08:34 PM
Anony Mouse

Dwolla's Terms & Conditions page shows different today from when I signed up. I don't recall receiving an e-mail or a letter in the mail notifying me of the change.

I am signed up as a business user with Dwolla and have received payments, thus I am certainly considered a "merchant".

Dwolla is free to change and/or clarify contract terms, but notifying their customers is absolute requirement.

Jul 27, 2011 at 10:16 PM

Anony Mouse,

Yeah, they have been rewriting EVERYTHING since July 25th, the day Tradehill went public. It's silly they are because Google cache has all the past bullshit on their website anyway.

The worse part is, all evidence shows Dwolla avoiding direct questions about certain transactions for two weeks up until Tradehill went public.

This shows they had full knowledge of what was happening. Note that Dwolla never said "oh, those transactions were reversed, time to file a dispute for arbitration". Instead, they are recorded saying some really shady stuff. Can't wait for those tapes to be released.

FYI - Bruce Wagner already released a tape recording where the head of customer service says " transactions are not reversible " like 5 hours before Tradehill went public.

Maybe Dwolla didn't set out to scam people, but when they choose the cover up and avoid dealing with their problems, they became just as bad as the scammers.

Jul 27, 2011 at 10:44 PM

Tradehill has a history of sloppiness, so I am not surprised.;all

Jul 27, 2011 at 10:49 PM

What TradeHill isn't saying is that this occirred over a two month period. You have to be really sloppy not to notice $37,000. Furthermore not a single TradeHill customer account was compromised.

This is an issue between Dwolla and TradeHill not Dwolla and TradeHill's Customers.

Jul 27, 2011 at 10:50 PM

$37,000 is a lot of money to lose in Chile! How did they pull it off?

I guess time to switch to more professional sites like Camp BX.

Jul 27, 2011 at 10:55 PM

Bitto, we don't know how Dwolla "lost" $37,000, though it can be reasonably assumed that it was fraudulent bank transfers. Switching from TradeHill to CampBX won't help you with Dwolla.

As for Dwolla, the thing that concerns me most is Dwolla "disappearing" transactions. According to generally accepted accounting principles this should NEVER happen. Dwolla is likely to find itself in a very deep pile of bull manure over this.

Jul 28, 2011 at 12:42 AM

Great news for Dwolla. Bitcoin is smalltime, hand-wavy silliness and this is a necessary growing pain for Dwolla to be considered a big boy service and not just a way to trade real money for spacebucks.

Jul 28, 2011 at 08:58 AM

Whoa...! What a bunch of lies from Milne.

1. , these processes have been in practice with these merchants — and (by) these merchants, I mean Dwolla merchants as a whole — for quite some time.

2.the latter of which never goes unanswered.


Lying means knowledge of guilt.
C'mon dude this is the internet. There is a nearly permanent record.
If you going to lie , at least wait till the truth falls down the memory hole for a few minutes

Jul 28, 2011 at 11:40 AM
That Dude

Watched the Bruce Wagner interview with TradeHill and the latter introduced some very disturbing evidence - a spreadsheet of the so-called scammers. They then freely acknowledged that these were likely fake names...Ok, so your whole "exchange" is nothing but fake people and fake money? How hasn't somebody shut down this whole sleezy world of scammers who are converting REAL money into fake currency? How is that not illegal? Is this an arcade or something? And people are buying "real products" with these Nintendo coins?

There's Dwolla's real problem: Letting the prospect of performing innumerable transactions blind them from the reality that they were essentially facilitating scammers. That's why they're not responding, because they don't want to further validate this dream world they somehow got caught up in. When that reality set it, I suspect it compelled them to make some tough and perhaps unwise decisions, but that cannot be confirmed. What can be confirmed is they probably should have notified users of any major changes in policy. But such things are most clear in hindsight and its something all young companies deal with in some capacity. Hopefully they learn and grow from this.

Lastly, Duder Tokens are now available. For $100 you can get 10,000 DTs that can be used toward the purchase of super neat stuff like pictures of me taking a dump.

Jul 28, 2011 at 11:44 AM

Doesn't any one else notice that all the quotes from Dwolla CEO Ben Miln in this article are just bland platitudes? "Moving forward", "legitimate products", (implying that bitcoins are not legitimate and therefor it is OK to reverse charges there), "At the end of the day", blah blah. No responses to questions about changes in policy. What a silver tongue! I wouldn't buy a used car from this guy!

Jul 28, 2011 at 11:54 AM

Bashing bitcoin is childish and downright irrelevant. It has nothing to do with the real problems here.

1) Dwolla told TH many times that transactions were not reversible. Once an account was changed to "credited" it wouldn't be changed back to pending. And yet, with NO DISPUTE PROCESS they did change it back to pending and stole the money back out of the account, with NO notification.

2) Dwolla went back to old, already issued account statements, and edited old transactions or erased them completely. FRAUD.

3) Dwolla changed TOS without nofication and is now saying "we were always at war Eurasia." Idiot move.

4) TH had to spend many manhours auditing these records to catch this fraud themselves. When they found the issues, they called Dwolla. For two weeks Dwolla avoided their calls, saying the CEO/COO was "not currently available" and that they'd "take a message." They'll reply immediately to an interviewer but their 2nd largest customer, who they apparently stole 37k from, they don't have time to talk to. SHADY.

They deserve the failure that's coming to them.

Jul 28, 2011 at 12:19 PM

Who uses Dwolla, except to get a hold of Bitcoins? And indeed the only reason to use Dwolla instead of Paypal or a credit card was the alleged irreversibility of the transaction.

Now Dwolla is clearly reversible - so no benefit is offered by them over Paypal/CC. Dwolla will lose the Bitcoin market, and from what I gather that is the lion's share of their business.

Well this is why the world needs Bitcoins anyway - so that people cannot be scammed by chargebacks.

Jul 28, 2011 at 12:42 PM
David Schwartz

Milne seems to be dishonestly equating disputes with ACH chargebacks. There were no disputes with TradeHill. Nobody was claiming TradeHill didn't do what they said they were going to do. These disputes were purely with Dwolla -- account holders claiming they never authorized the funds to be transferred to Dwolla.

And Dwolla *never* retained the right to relay disputes through financial institutions. Dwolla has only retained the right not to ever credit transactions that never clear and to claw back funds in advance of arbitration.

Jul 28, 2011 at 12:53 PM
Sally Ride

I have used Dwolla myself and I'm troubled to hear that they seem to be dishonest with their marketing and promises. For a while it was the only practical way to get money to one of the Bitcoin exchanges.

As for calling Bitcoins "fake" that's almost irrelevant to the fact that Dwolla has given misleading information. Bitcoins are no faker than the little numbers in your bank account, do you really believe there's a pile of gold or even dollars with your name on in sitting in the bank vault somewhere?

And lots of people are buying "real products" with bitcoins, not as a scam, but because they are easier to transfer online, safe and don't charge credit card fees. New LEGITIMATE bitcoin business are popping up all the time, like for example.

Jul 28, 2011 at 02:42 PM


That's what TradeHill is gonna use now. Paxum eats ACH chargeback losses and protects the vendor: all for a $5 per transfer fee.

Dwolla is dead, their replacement has been found.

Jul 28, 2011 at 04:16 PM

I am skeptical about Dwolla’s prospects. I don’t think that its business model will allow them to achieve any significant scale. At $0.25 per transaction, they would need many millions of transactions to make any kind of profit that would justify the effort. A million transactions a month, which might be what Dwolla is currently processing, only translate into $250,000 in revenues. The problem is that even 25 cents is probably too much, because banks are now doing it for free!

Jul 28, 2011 at 05:41 PM

"More then once"? Is this supposed to be a professional news site or what? Please go back to school and then try again.

Jul 28, 2011 at 07:52 PM
Danny Schreiber AUTHOR

Jesus - Thanks for pointing that spelling mistake out, it's been corrected.

Jul 28, 2011 at 11:27 PM

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