New York subpoenas PayPal
By Paul
In a filing with the Securities and Exchange Commission Friday, online payments company PayPal said that it received a subpoena from New York state’s attorney general asking for documents related to its processing of online gambling transactions.

No legal action has been taken against PayPal by the attorney general, but the subpoena will be used to determine whether New York should start legal proceedings against the company, PayPal said in the filing.

'PayPal intends to cooperate fully with the attorney general in this matter,' the company said.

On Monday last week, PayPal announced that it was being acquired by eBay for about $1.5 billion in stock. eBay said that after the acquisition, PayPal will no longer process online gambling transactions.

'We are making preparations in order to be able to fulfill the announcement that we will cease those transactions in connection with closure (of the deal),' PayPal spokesman Vince Sollitto said.

eBay spokesman Kevin Pursglove declined to comment on the subpoena.

Transactions with a higher risk of charge-backs, primarily those related to online gambling, accounted for about 8%, or about $116.8 million, of the money processed by PayPal in the first quarter. That represents a significant rise from the full-year total last year, when such transactions accounted for about 3.9%, or $137.28 million, of the transactions made through PayPal during the entire year.

The subpoena is the latest legal headache for PayPal. Immediately following the announcement of the acquisition by eBay, PayPal shareholders filed two suits against the prospective partners in Delaware court aimed at blocking the deal On Wednesday, shareholders filed two more suits, in Delaware and California Superior Court in Santa Clara County. The suits charge that the merger agreement is a breach of fiduciary responsibility to PayPal shareholders.

Additionally, the company attracted the attentions of state banking and financial services regulators who have questioned whether it is running an illegal bank or unlicensed money transmitter service. PayPal has since received or applied for money transmitter licenses in a number of states.

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