Death Metal Label Shuts Down After Paypal, Credit Processors Pull Out Due To DOJ, FDIC Initiative
Death Metal Banned

A wide-sweeping initiative from the United States Department of Justice back in 2013 called Operation Choke Point was initially designed to curb payment processing for “terrorist” activities, “fraudulent” purchases, and money laundering. However, according to one record label owner, the banks who have been in the news for demonetizing and deplatforming legitimate businesses over the last few months are doing so at the behest of those overseeing Operation Choke Point.

It started with a Kotaku in Action thread, which notes that a death metal/black metal record label has shut down in the wake of PayPal pulling out support for processing purchases, along with the creditors at Visa and MasterCard because the company was labeled as “high risk”, “promoting hatred”, “promoting violence”, and “promoting hate speech”. In the case of Elegy Records, a label that hosted all sorts of death metal music since 1996, their closure comes from the inability to sign with a normal credit processor due to being “high-risk”. There are also high-risk credit processors, but it’s expensive, unreliable, and comes with no guarantees, which makes it untenable for most normal businesses.

Elegy Records’ owner, Rob, told the outlet DeathMetal.org, in a piece published on December 17th, 2018, that PayPal simply said he could no longer use their services, following instigation from a website called MetalSucks, which is headed up by Matt Goldberg and Ben Umanov. The banks also abruptly cut ties with Rob as well, where he explained…

“They didn’t even have the business courtesy to inform me they were going to cut ties. I came to the realization of this when I went to process an order and the response message was “Invalid Merchant account” When I spoke to a representative, they informed me they did not wish to work with me because I promoted hate. I did receive a letter from them stating they were going to end the business relationship the date of termination was a day before the letter was written and a day before it was mailed. What a great banking service.

 

“This was a death blow, at this point I had no means to accept any form of payments aside from cash or Money order but there is no way to survive in that business model.”

According to Rob, his record label had been classified as “high risk” by the banks and credit processors, which meant that he was effectively blacklisted from the banking industry. In short, this meant that the only way to accept payments from customers was – as he mentioned – via cash or money orders. For online businesses it’s not possible to operate without some sort of banking institution, or credit card processing since all purchases are made electronically.

This also recently happened to Moribund Records, as well, which DeathMetal.org reported on back on November 4th, 2018. PayPal informed Moribund Records that access to their PayPal account would be restricted due to content-related violations. The said “violations” were in relation to the record label publishing Satanic death metal, and because it has an affiliation with the Church of Satan. Instead of dropping the edgy content, Moribund Records dropped PayPal.

However, Elegy Records’ Rob told DeathMetal.org that this kind of blacklisting isn’t necessarily limited to just PayPal and creditors. According to Rob, this started with the DOJ’s Operation Choke Point, and has been expanding ever since…

“When the processors would run a check on me and my business it comes back as HIGH RISK and RERPUTATIONAL RISK some of the red flags come back as: Promoting hate speech, promoting rape, promoting violence and promoting hatred.

 

“An absolute atrocious characterization and a very convenient way of fusing music band names, titles to an actual call to arms. The slightly veiled assertion is one that marks me as one who is inciting these actions. The overlords now wish to control what you can sell and what you can purchase. Speaking with a few individuals within the banking system (underwriters) as well as other labels [I learned that] this started with Operation Choke Point from the DOJ to curtail predatory lending, which, like most [rulings] has now expanded its tentacles.”

This is more true than you know.

In recent unsealed documents from the Operation Choke Point initiative, it was the Federal Deposit Insurance Corporation officials who were determining who credit processors and banking institutions could do business with within the United States, or who U.S., based payment processors could allow to use their services internationally.

Forbes published an article on November 4th, 2018 detailing how the FDIC officials strong-armed banks into cutting off financial opportunities for businesses in order to get them to shut down, even if the businesses were completely legitimate.

While there’s no mention of PayPal in the unsealed PDF documents made available on October 12th, 2018, a transcript of the deposition from senior policy analyst at the Federal Deposit Insurance Corporation, Ardie Hollifield, explained how the initiative was used to bully and illegally choke off businesses within the U.S. Hollifield stated…

“The DOJ dubbed the project “Operation Choke Point” since, as described by an Oversight Committee staff report, it was designed “to ‘choke out’ companies the Administration considers a ‘high risk’ or otherwise objectionable, despite the fact that they are legal businesses” by “deny[ing] these merchants access to the banking and payments networks that every business needs to survive.”

According to page 16 within the document, FDIC officials, including Marguerite Sagatelian and Michael Bernado, worked with the Federal Trade Commission and the Consumer Financial Protection Bureau on spearheading the idea about “protecting” consumers via lending cutoffs that would eventually become Operation Choke Point.

However, if the FTC is directly involved with the initiative, then it may impede the efforts from attorney Lior Leser who is filing a formal complaint with the FTC regarding PayPal and Patreon antitrust violations.

On the upside, Republican Representative Blaine Luetkemeyer has been at the forefront of trying to get the lasting effects of Operation Choke Point shut down. In an American Banker opinion piece published on October 24th, 2018, Luetkemeyer pointed to an example of the FDIC putting pressure on a bank to shut down a legitimate business, writing…

“In one example of blatant intimidation, a bank terminated its relationship with a legal business after threats from the FDIC. The bank eventually surrendered to the pressure, and when the bank notified the FDIC of the decision, they admitted that a risk assessment showed the business “pose[d] no significant risk to the financial institution, including financial, reputation, and legal risk,” yet they still terminated the banking relationship.

 

“For years, Office of the Comptroller of the Currency officials have continually denied any wrongdoing, yet in the newly-unsealed documents we see proof of a conscious decision to work in conjunction with the FDIC against payday lenders. These lenders were specifically targeted, not based on evidence of wrongdoing, but based on personal beliefs a decision to ‘suggest strongly that [banks] re-evaluate payday lending.’”

This would help explain why the credit card companies and even PayPal have been so mum about the reasons behind many of the bans, since the credit companies and banks are not supposed to point the finger back at the DOJ or FDIC for the bans.

Some have suggested that PayPal and the credit card companies are making these decisions based on ideological impetus, as detailed in a very lengthy and thorough video from ShortFatOtaku. But it may not be that simple.

According to the current evidence, it looks like these bans are coming down from high up in the government.

In fact, on page five within the unsealed documents, it’s explicitly stated from the FDIC that if the banks didn’t comply, someone would be fired. To quote from the deposition of Marvin Anthony Lowe…

“Accordingly, in late 2010 or early 2011, the FDIC’s senior Washington officials convened a meeting of all Regional Directors. The FDIC is divided into seven regions, each of which has a Director in charge of exercising the FDIC’s supervisory authority over each bank in his or her region. At this meeting in which all of these Regional Directors (or their designees) were gathered, the Senior Deputy Director for the Division of Supervision and Consumer Protection informed them that “if an institution in their region was facilitating payday lending, the Regional Director should require the institution to submit a plan for exiting the business.

 

“These instructions, the Senior Deputy Director, conveyed, came from “the sixth floor”—the Chairman and senior leadership of the agency

 

“At the meeting, the Senior Deputy Director conveyed the following message: “if a bank was found to be involved in payday lending, someone was going to be fired.”

So essentially, the PayPal bans, the Patreon bans, the credit card bans, and the banking bans, are being passed down from those within FDIC; and if the lenders, the creditors, or the banks don’t comply, “someone” is “going to be fired”.

All of Operation Choke Point’s activities were supposed to come to an end back in August of 2017 after a letter was sent out by Bob Goodlatte, the chairman for the Committee on the Judiciary House of Representatives, which stated that the investigations relating to the operation are “now over”, and that those initiatives should not be undertaken again. However, not all of the operations ceased, and as pointed out in a piece on The Hill, the actual regulatory enforcement has to come to an end via legislation.

Thankfully, there is legislation in the pipeline.

Representative Luetkemeyer is attempting to overturn the rather drastic effects that Operation Choke Point has had on American businesses with a counter-bill called the Financial Institution Customer Protection Act of 2017, or H.R. 2706. Essentially the bill would force banks and payment processors to give ample and valid reasons for cutting off payment to businesses and it can’t be for “reputation risk”. The summary of the bill states…

“This bill specifies that a federal banking agency may not request or order a depository institution to terminate a customer account unless: the agency has a valid reason for doing so, and that reason is not based solely on reputation risk.

 

“Valid reasons for terminating an account include threats to national security and involvement in terrorist financing, including state sponsorship of terrorism.

 

“A federal banking agency requesting a termination must provide the depository institution with notification and justification.“

It was voted on with almost unanimous bipartisan support from both Republicans and Democrats. Unfortunately, the bill has been stuck in bureaucratic purgatory as it awaits referral approval from the Committee on Banking, Housing, and Urban Affairs. It’s been waiting for said approval since December 12th, 2017 according to the last update over on Congress.gov.

Separate from Luetkemeyer’s efforts, there was also a lawsuit that was initiated back in 2014 against the FDIC and the Office of the Comptroller of the Currency for violating the Administrative Procedure Act and due process. More recently than that, Consumer Finance Monitor reported that on November 7th, 2018 thirteen Republicans sent a letter to the FDIC to urge them to cease taking actions against lawful businesses utilizing “Choke Point-like regulatory actions”.

While the situation is absolutely dire, and a lot of businesses are being upended by these rapid fire decisions being handed down from the payment processors, at least there’s some indication on where the decisions are coming from, and some efforts to get this draconian oversight repealed.

(Thanks for the news tip Ebicentre and Super Nerdland)

(Main image courtesy of iluvkud)

[Update: Added additional information about Operation Choke Point, the FDIC lawsuit and the initiative to cease Operation Choke Point activities.]


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Billy has been rustling Jimmies for years covering video games, technology and digital trends within the electronics entertainment space. The GJP cried and their tears became his milkshake. Need to get in touch? Try the Contact Page.

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