First PayPal cut ties to Wikileaks, claiming the secret-spilling web site violated its terms of service. Now it has frozen the account of a group that raises funds for Bradley Manning's defense.

UPDATE: PayPal has reversed itself, and released the hold on Courage to Resist.

Courage to Resist is a San Francisco nonprofit devoted to helping conscientious objectors in the military, and it has become the chief fundraising vehicle for the Bradley Manning Support Network, Manning's legal defense fund. (Bradley Manning is the Army intelligence analyst currently charged with providing reams of classified documents to Wikileaks.) As of February 10, it had raised roughly $176,000 to pay for costs associated with Manning's defense. But in late January, after weeks of negotiations centering on what the group's relationship to Manning was and what it was spending the money on, PayPal executives froze its account.

"Literally a few days after PayPal shut down Wikileaks, they started calling me and asking about Bradley Manning," said Courage to Resist project director Jeff Paterson, who also sits on the Bradley Manning Support Network's steering committee. "They wanted to know how much money we intended to raise, and what we planned on doing with it."

Courage to Resist had opened the account in 2006, and used it without incident until it became affiliated with Manning. PayPal's concerns, Paterson says, were vague but involved unspecified claims that "we were somehow tricking people into donating." But PayPal executives told him the company had received no complaints about the group. After some back and forth, Paterson says, PayPal asked him to link Courage to Resist's checking account to its PayPal account, potentially giving PayPal access to the group's funds (up until then, the group simply had a credit account). When Paterson said no, PayPal froze the account, which contained $400 at the time.

"The way we're structured," he said, "we simply can't allow a third party access to our checking account. It's a higher standard than we'd used for the previous five years, and it's just annoying from an accounting perspective. We didn't want to do it."

A PayPal spokesman confirmed that the company put a "temporary limitation" on Courage to Resist's account, but denied that Manning had anything to do with it. "I can categorically say this had nothing to do with Manning," said Anuj Nayar, the company's director of global communications. "To be honest, we're surprised at this. We're still talking to them. We review accounts as they come up, and one of the things we ask nonprofits to do is associate their PayPal account to a checking account. That doesn't mean we can withdraw funds without their consent—we can't."

Paterson said losing PayPal was a minor annoyance—only about $6,000 in donations, or 3% of the total haul, had come in through the service. "It was mostly for international contributors who didn't have a credit card or American checking account," Paterson said. "It's not huge, but it's an irritant."

It's one thing to cut ties to a group that's currently the target of a federal criminal investigation. It's entirely another to freeze the account of a group that's devoted to raising money to defend someone who's currently the target of a federal criminal investigation. A quick search of "legal defense fund" and "PayPal" turns up plenty of accused criminals using the service to raise funds, including the "Barefoot Bandit" Colton Harris-Moore, a trader accused of stealing Goldman Sachs' trade secrets, and an accused child pornographer. It could be that those funds were willing to jump through the financial hoops PayPal demanded of Courage to Resist. But it's a mystery why the group could use PayPal as it pleased for six years before Bradley Manning came along.