Of course, in his case the backlash to an account freeze would probably kill paypal (would be so widely reported that the feds would have to get involved, I'd guess), but still...
That's how it works everywhere. It's written into any merchant account agreement with any payment provider. If your average ticket size, average monthly volume, or the business you're in changes, you have to notify them and get approval because it changes your risk profile. Because Visa and MasterCard mandate a <1% average chargeback rate from their members, that carries through to every level of payment processing service to make risk management a core piece of the business.
3rd party processors make it easy to sell an item or two on eBay without having to fill out pages of work history and references as you'd have to in order to accept credit cards directly... because there's very little risk. If you scam someone out of $100 and they charge it back, that $100 is going to be too small a portion of the processor's business to impact their rate.
But if the next month you sell $100k of product, and they don't even know who you are or what you're selling, it's time to pull back and ask you who you are. PayPal will do this. Amazon Payments will do this. Google Checkout will do this. 2Checkout will do this. Heck, 2Checkout will also call a random sampling of your customers to make sure you're actually selling what you say you're selling.
So in exchange for not having to fill out a 6 page application up front and tie yourself to a contract with monthly fees, PayPal and every other 3rd party processor will suspend your account for a business day or two to get the information from you only when it becomes necessary, then set you back on your way to continue doing business.
Most people never think about things like chargeback rates and risk to the processor, so when their account gets suspended, they freak out and spam a blog post assuming someone's trying to steal their money. A few days later they always have to follow up that everything's actually OK... there's no conspiracy to lock accounts and earn interest on the balance (reserve funds are held in non-interest-bearing accounts), they really just want to make sure you're not something so risky it's going to hurt their average chargeback rate.
He's making like $220k/day. Something like $70+ million total sales.
I’m pretty sure that someone somewhere on the web has recorded those numbers – but I’m too lazy to search right now.
Calculating the average is something I can do, though: On January 12, 2011 Minecraft had sold one million copies. Since then Minecraft sold another 3.4 million copies in 345 days – that works out to an average of a little less than 10,000 copies per day.
That works out to €150k daily revenue for 309 of those days (during beta, €15 per copy) and €190k daily revenue for the rest of the time (after the release, €20 per copy), resulting in a revenue around €50m for 2011.
Apparently, yes: http://texyt.com/minecraft+persson+notch+indie+game+success+...
At the end, they note that sales were settled in to about $100k/day in September 2010, from a relatively brief peak of $350k/day. Amazing numbers.
Granted, he will eventually receive it (after 180 days). But, he will not receive it before then. This is a matter of standard operating procedure for PayPal.
PayPal isn't worried until your chargebacks are more than 1-2% of your volume. With a dispute rate that low on so much volume, he's helping bring down PayPal's overall CB rate with their banks (Wells Fargo and Chase), doing the company a favor.
Not only will Louis's account not be frozen when he withdraws the money, but his dispute rate as a percentage of volume is so low, the mails he gets about them will say "because your chargeback rate is so low, we are allowing you to keep the funds until the end of the investigation". I know this because that's what they send me, too.
This is standard operating procedure at PayPal. Louis CK is their optimal merchant in almost every way. Even if their business processes were so terrible as to want to close this account, which they aren't, it's not a company of fools -- this account is run by a celebrity selling a virtually no-risk product and brings in $50,000 a month in fee revenues for PayPal.
The only thing he has going for him is his fame. This makes freezing of funds slightly less likely, though still not entirely implausible, solely because he could actually cause a large amount of negative publicity.
I'm sure people have their accounts frozen every day. Most of them will have them unfrozen as soon as they fax over an ID and a bill, while the rest were actual fraud that needed to be stopped. When you're dealing with more total users than the population of the United States, that's to be expected.
Probability says that if PayPal were as irrational as you paint them to be, they would have no high volume merchants paying the bills at all, as 99% of them would be terminated for no reason. Is that really what you're selling?
As for me, I've been through everything PayPal can throw at you. I've been through everything the merchant processing industry can throw at you. I learned about risk and fraud management early when one of my businesses was targeted by a credit card scam ring that lost me my first merchant account. I had thousands of dollars held for, you guessed it, 180 days... while I was still on the hook to provide product and service to customers without their payments to cover it.
My PayPal account's had its ups and downs, I've seen every type of dispute, complaint, escalation, chargeback, and reversal possible. I've dealt with the risk department, faxed in documentation, argued over inane policies and seen the boilerplate autoresponse system first level customer support can feel like. But in the end, 11 years and 6 months after first signing up, I'm still with them, because they're no worse than anyone else in the industry. Hell, they're better than most of the industry, certainly less deceptive when it comes to fees. And I've managed my own fraud problem to the point that, as I said in an earlier post, they now send me mails starting with "as your chargeback rate is so low...".
PayPal uses a number of factors to determine the risk associated with particular transactions, and in turn the aggregate risk presented by the receiving account. They look at things like the age of the accounts sending money to the merchant, percentage of foreign transactions, the payment methods used (credit card, instant transfer, paypal balance, etc.), and many other factors. None of these are within control of the merchant. If, in aggregate, these factors happen to fall outside of the the norms, it increases the likelihood that your account will be limited without explanation - regardless of how many faxes you send them and additional hoops you jump through.
While PayPal may in fact have internal data to justify these decisions, they could just as easily achieve the same risk-management goals with far more merchant friendly measures, such as rolling reserves. In far too many cases, they simply close the account and hold the merchant funds for as long as the law allows.
That is my problem with PayPal.
Besides, the people having issues with PayPal have (almost?) always been using terminology implying that they were taking donations without being registered as a non-profit, or were taking money with the promise of a return in the future.
I'm not trying to defend PayPal here; I'm just pointing out that there is specific behaviour that is likely to invoke their wrath, and Louis C.K. does not appear to be doing those sorts of things.