Related:

https://news.ycombinator.com/item?id=41856330

Some more horror stories from merchants in the comments there.

Thanks—macroexpanded:

Digital River runs dry, hasn't paid developers for sales since July - https://news.ycombinator.com/item?id=41856330 - Oct 2024 (17 comments)

To add few more resources that are not immediately visible:

Layoff reports: https://www.thelayoff.com/digital-river

Public UK gov records filled by Digital River UK, including 51 page contract between all Digital River subsidiaries in all countries and Cerberus Business Finance Agency on 8 August: https://find-and-update.company-information.service.gov.uk/c...

Digital River emailed out of the blue a few months back saying we need to do new Know-Your-Customer paperwork. The forms are painful and I've had to resubmit a couple of times for minor mistakes - unsure if they'll ever actually accept it, and it seems to take a week or more for any response to a ticket.

Their new platform terms come into effect today, and they have absolutely buried the scale of their new monthly fee (US$100/month for me - unsure if it varies per customer). None of the emails mention the fee amounts. Customer support couldn't tell me the fee amounts. I checked the portal again today and the new contract finally has the new fees in it.

I setup a new merchant of record a few weeks ago, but that doesn't help the fact they're sitting on a few grand of my sales. My balance is above their new payout threshold (US$2500), but it wouldn't surprise me if they sit on the money and let the monthly fees eat into it until it's back below the threshold.

Thought I was doing the right thing by using a merchant of record to handle my international B2B sales since 2016. Apparently not. Fun times.

Using a merchant of record is a good idea in 2024, now that every little jurisdiction wants you to collect their sales tax for them, and to remit that sales tax to them. (That wasn't always true.)

Stripe recently acquired Lemon Squeezy, another merchant of record, so maybe look into that. (Stripe Tax will help you collect the right amount of sales tax, but that's only half the problem. You still have to remit it to all the relevant jurisdictions.)

Other options are Paddle and FastSpring.

Thanks. I ended up going with Lemon Squeezy a couple of weeks back. Had a lot of account verification problems (500 errors on various screens), but eventually got that sorted after their support realised there was an actual product problem. I like their product, but wish the product setup & cart was more flexible.

I saw a thread here a couple days ago about new product liability rules for software in the EU that would apply to importers/distributors where the manufacturer is overseas. I wonder if anyone will still be willing to provide this "merchant of record" service in the EU once that takes effect.

Aren't those rules related to software shipped in hardware?

at the worst wouldn't it just mean that a lot of merchants of record will say we don't handle software, and maybe one or two big ones scoop up all the software business with some fancy insurance deals?

I believe this is what the theories of capitalism say would happen.

What are the options if a business wants to collect subscriptions worldwide and pay cashbacks to US customers? Guess Stripe offers tools for both.

what we can do:

1 Ask customers if they agree to get refund&repay you to different merchant. Subtract 180 days from now for paypal orders (there is no deadline for CC? i could refund 1 year 2 months while testing) and start refunding orders after this date. We are losing ability to do this everyday, but we increase our refund rate by doing this so no hurry

2 Ask users w/ lawyers to fill class action lawsuit or at least to share their contacts/lawsuit+claim interest rate for unpaid amount https://www.kvraudio.com/forum/viewtopic.php?p=8979590#p8979...

3 subrogation: sell our accounts to lawyers

3 sounds like the best option - especially if many of the merchants agree to sell to the same lawyer, maybe it will end up owning the company and reform it

Same problem here,last payment was for May revenue. And other companies have Same problem

https://www.linkedin.com/posts/maja-te%C5%A1i%C4%87-8435509b...

+1 Exactly what we are experiencing ourselves but we made the mistake to wait till the beginning of October to switch: even if we didn't like the payment term changes, we had no reasons to suspect that we wouldn't receive any moneys at the end of September / beginning of October. They now owe us tens of thousands of dollars. And with the massive exodus, I do not have high hopes to get any of that money at all. We've been with this company since 2001 (previously called Element5 / Share-It!) without any problems. I can't understand or imagine what could have made them believe like this: as of today, they are still processing payments from end users! Hopefully, raising awareness on this issue will give us at least answers...

It's speculated on that audio forum that they took a big hit when Kaspersky sales were banned in the USA, as this was their perhaps biggest customer. Who would thought that such thing would affect many other vendors not related in any way to Kaspersky?

Still, their cut is around 5-10%, depending on how much they dip on the exchange rate. That means they hoarded 10-20x of their usual profits for July, August and September from all the other vendors. I sure hope that they didn't spent all that or moved it to a parent company. But the fact that we're not hearing any official statements suggests otherwise.

There's no money to hoard. It doesn't really work like that.

Companies like this are usually run as a barely sustainable ponzi scheme. Any money they might have had is long gone. They're paying your September revenue with money from their October sales, and they plan to pay your October revenue with money from their November sales.

Then suddenly their sales take a big hit, perhaps because a big merchant left, or perhaps because of a general economic downturn. They still need to pay out their other merchants' October revenue, but their November sales are not enough to cover it. What happens is that they announce that from now on, payment terms will be net 60 instead of 15 or 30. This is the first big red flag. The plan is to wait for December sales. Maybe that will solve the problem in the short term. Maybe it won't, and if it doesn't, by January everyone is in deep shit.

In a way you're right, but we should also take their payment schedule into account. They used to pay 15 days after the end of the month.

That means they were at most taking a half of future month for "ponzi buffer". Couldn't be more than that, if we assume they were not accruing debt. Which they most probably did, but for the sake of high-level analysis we could assume they were at zero.

They're now all of a sudden sitting on a July, August, and in most cases good piece of September sales. They basically went from 15 days of "extra ponzi buffer" to 45 day. If we include July, which they also didn't pay - they're now sitting on 75 day of revenue. That's quite the extra money compared with extra buffer they were operating with until recently, depending on how we look - 5 times more.

We should also take into account that MyCommerce margin is between 5 and 10%, depending on order size and how much of currency exchange they take. So their operating expenses should be around that. Even if they lost some big clients and let's say lost half of the sales, their expenses should went from 10% to a 20% of a single month. But they're sitting on full 2.5 months of now, 25 times more than their typical expenses.

Something is way off, that can't be explained with gradual slip into ponzi scheme.

One explanation was that Kaspersky was so big for them, it made 90% of sales. When they left the platform, their operating expenses went from 10% to 100% (using napkin math, we're only guessing anyway).

However, since they had a huge layoff in July I assume they're adjusting their expenses to the loss of such a big client. Layoff in US was without severance, based on reports. Since they continued collecting money from other vendors, and not paying them, and considering that they accumulated multiple months of full revenue compared to the usual 5-10% of a single month they should still have MUCH more money at hand.

It's very likely that they're transferring that money to another entity. Perhaps paying off a big creditor, which might be legal, but they intentionally picked to pay off one single creditor with big legal team instead of hundreds (thousands?) small defenseless vendors. And they lied to these small vendors to make them stay a bit more and siphon some more money for that other party.

In essence, they told us to stay with them and bring them more sales which at that point they were already planning to send to another party. This very much looks like a fraud and theft.

Isn't this illegal as fuck?

When they take 100$ in revenue, 10$ of that is their money, 90$ is your money (even though they handle it), which they can't legally touch, no? Or is that only for regulated industries?

Yes, very illegal. But that doesn't stop people from making the dumb decision to do it.

That's one big and very expensive lesson. If you're using distributor/reseller/payment processor, you're in fact their creditor, with all the risks it takes. I never thought of myself as a creditor until this happened.

Write off your loss and move on. Based on previous instances of this happening, you have more chance to recover your money from a crypto exchange gone bust than a traditional credit card processor.

I, also, would not consider this a major hit. You had been sailing with them for 20 years. I've seen many more things break in a shorter time frame. Such is life.

You are of course right. However, there are two aspects of "write off your loss". Mental one, and a legal one. Unfortunately in our jurisdiction (Serbia), as soon as your company issues an invoice, it's counted as realized income for tax purposes. I've just opened this can of worms, but apparently you can delay that on-paper income if payment is late, but in the end you might need to sue the other party and get court documents to prove they can't pay.

Back then I only issued an invoice when the payment was made. My accountant tried to explain to me otherwise but it never made sense to me. Not getting paid and also having to pay taxes on that?

As soon as they got bought out by a private equity firm (10 years back) it marked the beginning of a long, slow end.

Crazy to see the downfall of a company in real time. Management is pulling some Ponzi scheme shit.

Wonder if this company took on a shit ton of debt or PE and now the bill is due.

One person reported that "Contract library" is no longer visible for him in his MyCommerce account, and supported it with a screenshot. I suggest that we all download all documents that could be useful from their portal - contracts and sales/order reports for problematic months.

Edit: he clarified later that he's already in the process of cancellation and that's probably the reason he doesn't see contracts any more

They're also (or were, a couple of years ago) handling all Lenovo sales in Germany, so if it's true that would be a big deal.

I'm also affected. I'm considering suing them, but I am unsure if that makes sense. The German entity probably has no assets. Lawsuit would probably cost thousands of euros in legal fees, take a year, and it is unlikely there are any assets left to recover by the time the lawsuit is over.

Sounds like they're trading insolvent, in which case you're not going to get any money out of them if you sue them.

I am also affected. Can somebody suggest a good alternative?

Maybe Lemon Squeezy? Stripe recently acquired them, so they're probably not going insolvent any time soon.

It's interesting to see how unilateral contract and term changes, assumed consent etc. pioneered by internet companies in "B2C" relations is now becoming a more widespread thing for B2B relations as well.

These b*stards owe my company $90,000 for the July/August payment. A class action lawsuit seems to be the only viable option. While $90,000 might not be a large sum for a lawyer to take on individually, if it's multiplied by 100 or 1000 cases, it becomes much more significant. I've conducted a thorough search but haven't yet identified a law firm we should all reach out to. Since we're not based in the US, our current law firm isn't a strong enough option. According to this article... https://www.theregister.com/2024/10/15/digital_river_runs_dr... DR's lawyers are: https://mintzandgold.com/

Keep in mind the money is probably mostly already gone. And a class action suit will take a large chunk of the remainder. So plan to get none of it back.