Paypal is a long-time client of my consulting firm, and several of their trust and security people are good friends. They are not stupid or malicious. Unlike the author, they are cognizant of a basic truth about the Internet:

In any situation involving money, every loophole or mechanism for scamming people will eventually be discovered and then exploited to an extent you never believed possible. Just as the Internet has massively changed the basic economics of almost every industry, it has greatly reduced the risk and costs of widespread fraud to a level that would make Charles Ponzi cry with joy into his spaghetti.

There are teams of extremely intelligent and motivated people who spend their entire working careers figuring out ways to rip off Paypal (and Amazon, eBay, Google, Baidu, Bitcoin merchants, etc...) If a top tier company that deals with money on the Internet is problematic for a certain transaction, then you can be sure that is due to a real problem in the past that resembles that transaction.

Pydanny believes that Paypal's actions are without basis, so he has clearly identified a market inefficiency that is ripe for "disruption".

I think pydanny should take this opportunity to pitch his payments startup, PyPal, to pg and several other top-tier angels/VCs. Make sure to include a slide on fraud and loss prevention, and clearly outline the policy that will differentiate you from Paypal:

"The developer community is critical for the success of PyPal. In a situation where a PyPal account identified only by a Yahoo email address and with limited transaction history receives hundreds of thousands of dollars in deposits for a service that will not be delivered for months, we will not freeze that account under any circumstances. Especially if they self-identify as a Python developer."

Let me know how the pitch meetings go.