This exact thing happened to me... I used pledgie + paypal to accept donations to help a friend out in Peru who's home had been devasted by flooding. Paypal froze my account, customer service wouldn't tell me what was up, only that I had to EMAIL the "Compliance Department" which doesn't do phone calls. The compliance department told me I needed to provide the paperwork to prove my non-profit status, which of course I could not do. I sent my friend the amount donated out of my own pocket since the money was locked down in paypal. After 3 months of emailing back and forth I finally got nasty with them and threatened all sorts of lawsuits etc etc. While they haven't reinstated my account they finally allowed me to withdrawl the money. That account is basically in a permanent restricted status and unusable.

PayPal is the new mafia.