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Dude, give them some credit for moving $1M per day without even integrating with POS.

You CANNOT build a billion dollar company without breaking laws knowingly or unknowingly.

EDIT: Please don't take this as an insult, but you seem to have a negative attitude when it comes to competitors. I noticed this a few times. This makes you sound jealous (maybe you aren't, idk) and devalues your comments.

EDIT2: And they have done this with $1.3 M in funding, and 12 people. Hats Off. Hats Off.

And they did it in Iowa. Money and developers are not exactly growing on trees around here.

Hey now don't hate on us Iowa startups.

yeah, what he / she said! :p

No hate -I'm in Omaha. And coming from Austin, it is a whole 'nother world trying to find developers who are willing to accept the startup lifestyle. In Austin, they complained about how "easy" it is in the Valley. In Omaha, they complain about how "easy" it is in Austin. Bottom line is you gotta make it work no matter where you are, but I'm pretty impressed with Dwolla's progress given the state of the industry in the Midwest. Not a dig, just an assessment.

I got here a year or so ago, and I've been pleasantly surprised at the level of activity in the Midwest, but it's got a long way to go in terms of depth and breadth of skill available to draw upon.

Actually, I'm not surprised a company like this has started in Des Moines. Contrary to Milne's "location is just an excuse", location is everything for a start up.

Des Moines' little secret is that it's a major "back-office" financial-services center--banking, insurance, mortgages, annuities, etc. Wells Fargo, Aviva, Principal Financial and others have either their corporate or divisional HQ's there.

There's also a heavy marketing and publishing cluster there (including a couple of sizable companies owned by Hearst--which is also the parent of SFGate). But that's tangential...maybe.

Another reason is Des Moines is small and homogenous enough for people in the financial services community to know each other. And to influence/be more easily influenced.

These reasons--and others--are why I completely disagree with Milne's statement that "location is just an excuse". It's not. Start ups need the proper environment to take root and grow--infrastructure, people (domain experts and technical), and "political" protection.

The fact of the matter is, Dwolla probably would not have survived this long in the Valley, Wall Street, Route 1/128, or Austin. It is a financial-services-oriented start up in a small, but highly concentrated, financial-services town where someone high up on the local totem pole liked what they saw.

And sometimes, that's all it takes.

Great points. I came to Omaha from Austin, and have found that it is orders of magnitudes easier to get noticed in Omaha. There is just less noise. As the industry evolves and grows here, that effect will begin to disappear. For now, it's a benefit that local startups need to appreciate and take advantage of.

I follow Bitcoins, in the matter that some people might follow Nascar crashes, and it is not credible to me that Dwolla is primarily getting those volumes on Bitcoin transactions. First, the Bitcoin community is, on the observable evidence, not large enough to support them. Second, my understanding is Dwolla belatedly discovered the value of chargebacks, which bit the Bitcoiners because of all the obvious reasons.

Last time I checked Dwolla still hadn't solved the ACH chargeback problem.

What patio11 is saying is that Dwolla underestimated the scam potential by accepting payments with are rechargeable and giving non-rechargeable "digital cash" in return.

Basics of the scam: Deposit in Dwolla, buy Bitcoins on an exchange, send bitcoins to your own wallet, chargeback Dwolla deposit.

A couple of months ago TradeHill, the second largest bitcoin exchange, discovered Dwolla billed them $30K in chargebacks despite their claims of never doing that.

It's this Dwolla issue that stopped the influx of new money into Bitcoin and now the price is 90% down.

This is a key problem for growing any kind of digital cash like economy: somebody needs to take the risk of turning chargeback-money (USD) into cash-like money (bitcoin), or you need to have a network to somehow take physical cash.

Or it's not USD that is chargeback, but the nature of digital transaction for the current state. If you go to a store and buy a can of soda with bills and coins, you don't really get a chargeback without handing back the goods.

It just illustrate that online transactions should be chargeback-able to protect consumers from fraud. Bitcoin just doesn't cut it.

But if I want to send money to a family member (as an "online transaction"), and I have concluded that I do not need chargeback protection, why should I have to pay an extra fee to cover all those people who DO need it?

I believe there's a place for non-chargeback online transactions. Just as there's a place for non-chargeback in-person transactions (i.e. CASH).

Do you have a source for your claim that users are transacting over $500,000 per day on Dwolla for Bitcoins?

Dwolla's entire purpose is not to use the traditional POS systems. However, they could certainly create their own inexpensive POS device with no interchange fees or use a cell phone.

Glad to see you sue over unjust laws but no need to bash Dwolla. The service is unbeatable compared to any other way to transfer large amounts of money.

I edited my post to better reflect what I know for sure.

I'm from Des Moines and know a couple of people that work at Dwolla. I haven't heard anything about Dwolla doing a lot (if any) bitcoin transactions. Do you have a source on that?

Dwolla has an API so any point of sale system can integrate with it if they so choose, but I believe that most retail locations that accept Dwolla either check the dwolla website, iphone or androids apps for incoming payments.

Here are some Bitcoin/Dwolla links:

https://en.bitcoin.it/wiki/Dwolla

https://en.bitcoin.it/wiki/MtGox#Dwolla

http://www.siliconprairienews.com/2011/07/as-bitcoin-exchang...

I'm not aware of any POS companies that have actually implemented the Dwolla API, but I could be wrong.

I don't see any source that would lead me to believe that "Most" of the Dwalla transactions come from BitCoin, anywhere in your 3 links.

"A portion of" or "part of" does not mean "most of", any way you look at it. So, do you have any concrete sources?

They're one of the easiest ways to transfer funds into MtGox, the main USD bitcoin trading site.

I don't have any idea what percentage of their transactions are bitcoin related, but it's definite that it accounts for at least some of it.

Both TradeHill and MtGox stated a couple of months ago that they were the two largest clients of Dwolla.

Than Dwolla did chargebacks and SHTF in the Bitcoin world.

Your lawsuit page raises a few questions:

• Are you suing them without a laywer? Everything looks to be directly from you to Somebody Important.

• Why are so many people CC'd on your emails?

Lawyers are expensive and in my experience do not provide value commensurate with the expense.

The underlying issues here are of national interest and involve a complex regulatory regime including the Department of the Treasury, the Federal Reserve, the White House, Congress, and state regulators. There are a lot of people who need to know what's going on.

I sincerely hope you find peace one day.

I doubt it. Seems like he likes fighting people.

Well then, I hope he doesn't find peace but does good and not evil.

We need people who like to fight. We just need them fighting the right people. Sounds like he's off to a decent start, if he can continue it.

I disagree. The world has more than enough people who want to fight and complain. Look at OWS etc.

I look at them. I just think they accomplish something useful. It sounds like you don't.

Not hiring lawyers can be pretty expensive, as well, especially when you're taking on the Department of the Treasury, the Federal Reserve, the White House, Congress, and state regulators.

Don't you need to be a lawyer in order to represent a corporation in a court filing? See United States District Court, Northern District, Local Rule 3-9 (b): Corporation or Other Entity. A corporation, unincorporated association, partnership or other such entity may appear only through a member of the bar of this Court.

Sorry but you're quite insane. Well maybe not insane, by certainly an egotistical nutjob. Just randomly cc'ing organizations takes away any credibility that you may have had (which wasn't much after not using a lawyer for a case like this). If you think you can win this without a lawyer you're completely delusional.

Also, isn't working on this taking away time to be working on your startup? Or is this just some dumb promotional stunt?

EDIT: Your filings against Airbnb, Facebook, Stanford, USC, etc... shows that you have lost your grip on reality. Do you really think thats going to help or just piss people off?

Aren't you the same guy who was claiming that Facebook ripped you off? How about you actually create something that people want to use, rather than complaining about everyone around you.

I think it's probably a game at this point for Aaron. Anyone who actually wanted to achieve the desired outcome would act in just about the complete opposite way.

Instead of tell us what they do wrong why don't you tell us what you do right.

While the article appeared on a San Francisco news site, the company exists in Iowa. Thus, California law matters very little to them.

That's just not true. If even one California resident signs up for their service to transmit funds--and I am a California resident who has signed up for their service--California law applies.

I believe that you are wrong.

My understanding is that if a California resident signs up for a service with a company in Iowa that has no California presence, that becomes interstate commerce. According to the Constitution and case law dating back to the 1800s (largely established by mail order companies), California does not have the right to regulate interstate commerce. Even when one end of that transaction is in California.

That is, in fact, at the heart of the whole sales tax issue with Amazon that has been in the news. By California state law, sales tax is owed, but California can't regulate what Amazon, an out of state company, does. Only Congress has that authority. (It looks like they may do it as well.)

I am not a lawyer, and could be wrong. If you want actual legal advice, you need to consult a lawyer. But this is my understanding.

Your understanding is incorrect.

California has the constitutional right to regulate commerce within its borders. When a California resident in California signs up for a service, even a service provided by a company in another state, California law applies.

In this case particular case, California exceeded its constitutional bounds by passing a law that claims to regulate commerce nationwide. Whether or not you agree with that, the exemption order that my company received proves the interpretation.

Either way, Dwolla is not registered as a money transmitter in California, has not applied for a license, is doing business with California residents in the state, and is in violation of the law as a result.

New York used to have a physical presence requirement as part of its money transmission statute; those companies without a physical presence in the state were not required to obtain a license. As of September 30, 2011, that changed: all money transmitters with New York customers must obtain licenses, whether or not there is a physical presence. With the advent of the internet, states are realizing that "presence" does not necessarily have to be physical in order to claim tax revenues or license fee revenues.

Is his understanding incorrect, or is it your understanding that his understanding is incorrect?

Yes, states like to claim that they have jurisdiction. But I haven't seen court cases supporting that theory.

I would be very interested to hear about any that you run across.

One of the cases is his own lawsuit against California, which is underway: https://www.facecash.com/legal/brown.html

The critical difference is that he has a California company that California is trying to regulate under California law. The company may still win on interstate commerce, but California is in a much stronger position than it is when trying to regulate an Iowa company.

Your company exists in California, making it subject to California law; thus, any interaction between your company and the state of California doesn't prove anything. I still consider the law awful, but that aspect of it unfortunately does not exceed the scope of state law.

Unfortunately, until California makes the mistake of attempting to go after a non-California company with this law, the law won't get overturned on the grounds of regulating interstate commerce.

They can claim all the tax revenues and license fee revenues they like, but they'll find themselves sorely disappointed.

Josh,

What you're missing is that California went after my company for attempting to do business outside of California, which gives my company standing to oppose the law on interstate commerce grounds.

Aaron

What I'm missing is where they "went after [your] company". Did FaceCash get a cease-and-desist that isn't documented in your HN submissions about the issue?

You don't need to issue a cease-and-desist to choke the life out of a company through clouded regulation such is the case w/ FaceCash. Aaron is obviously going to operate his company within the confines of California law and wasn't able to do so...

I'll be following the civil suit very closely. Best of luck.

My point is that "went after my company" implies that they targeted him specifically, which doesn't seem to be supported by the facts at all.

It's like saying "the government is after me!" because of the Census.

It's documented in the complaint filed with the Court.