Thoughtful, detailed coverage of the Mac, iPhone, and iPad, plus the TidBITS Content Network for Apple consultants.

Kagi Shuts Down After Falling Prey to Fraud

The news was as sad as it was unexpected. Kagi, one of the earliest digital commerce companies and long a favorite of many Mac shareware developers, has shut down as of 31 July 2016, just shy of 22 years in business.


Kagi’s home page gives a brief explanation of the situation but to find out more, I spoke with Kagi CEO Kee Nethery, whom I’ve known since he was a product manager at Apple in charge of the Mac-based Apple Internet Server line. Here’s the story.

Over ten years ago, Kagi was looking to expand its business. In the process, they started handling subscriptions for a company selling a legal consulting service — the idea was that you’d pay a $29 monthly fee and be able to get answers to legal questions. The company was both legit and seemingly successful, and the service was real, but what Kagi missed in their due diligence was that the firm’s sales team used high-pressure sales tactics. As a result, many customers were unhappy, and to avoid further pressure when trying to cancel their subscriptions, they instead disputed the credit card charges, generating what Kee described as “an amazingly large number of chargebacks.”

(A brief aside here. When you dispute a credit card charge, the credit card company will usually reverse the charge for you without asking any questions, forcing the merchant to refund your money and charging the merchant an additional fee in the process, $25 in this case. Plus, such chargebacks reflect poorly on the retailer’s reputation with credit card companies. If you’ve been treated badly, disputing a charge may be appropriate, but it’s overkill if you just want a refund from a legitimate merchant who would be more than happy to give you your money back.)

All those chargebacks had two adverse effects on Kagi. First, both Visa and MasterCard put Kagi on a “watchlist,” which is usually followed by dropping the company as a customer. That would have been the end of Kagi. Kee was proud of the fact that Kagi was able to work its way back from the brink and be reinstated as a customer in good standing. He told me that a person who worked at Visa mentioned to him that he’d never seen anyone get off the watchlist before.

The second problem was more serious. The legal consulting company had quickly become Kagi’s largest client, to the point where it was averaging about 20,000 transactions per month. The percentage of chargebacks was high, but not initially beyond the pale. Plus, at that point in its history, Kagi was still processing chargebacks manually because there had been so few up to that point, and that manual processing obscured the severity of the problem. After four months of refining the legal consulting company’s process to set customer expectations appropriately and improving the chargeback process, however, Kagi realized that the problems weren’t going to go away and dropped the company as a client.

The legal consulting company then reneged on its responsibility to repay Kagi for both the $25 chargebacks and the $29 subscriptions, leaving Kagi with a massive debt. That’s an unacceptable way to run a business, to say the least, but when Kagi eventually took the matter to arbitration and won, the settlement didn’t even pay for Kagi’s legal fees.

Kagi could have shut down then and there but instead tried to work off the debt. For the last decade, they’ve been doing just that, working off $600,000 of the overall amount. Unfortunately, that required borrowing against the money they had to pay out every month to suppliers — the developers who sold their products through Kagi. The technique worked well as long as the monthly payout was larger than the debt, but in the last few months, the monthly payout has slowly dipped below the necessary threshold. Rather than string developers along, Kagi decided to cease operations entirely.

(As another aside, we’ve seen Take Control book sales dropping over the last six months as well. I don’t know if the unsettling tumult in national and global politics is responsible, or if there’s some other explanation, but it is concerning. Perhaps things will recover after the U.S. presidential election and once there’s a path forward for Brexit.)

You’ve undoubtedly heard of companies filing for Chapter 11 bankruptcy, part of the U.S. Bankruptcy Code, which allows companies to avoid paying creditors all that they’re owed while continuing to operate. There’s also Chapter 7 bankruptcy, under which the company goes out of business and its assets are liquidated to pay creditors. Chapter 11 wouldn’t work for Kagi, because what developer would continue to work with a company that couldn’t guarantee to pay on time? Even Chapter 7, while simpler, still involves courts and high legal fees.

Kagi is instead using a state-based option, called ABC, or Assignment for the Benefit of Creditors. It’s most common in California, where Kagi is located, but many other U.S. states have similar statutes. The advantage of ABC is that the costs are significantly lower, which means more money for creditors. Under ABC, an independent company takes over, liquidates all assets, and manages the payout of all the leftover money.

Right now, Kagi owes money for June and July to about 2000 clients, of whom fewer than 1000 were active sellers. Unfortunately for those companies, between the time necessary to work through the ABC and the fact that credit card companies are holding onto a lot of Kagi’s money to cover refunds and chargebacks, it will probably be six months before it’s known how many cents on the dollar each client will receive after taxes are paid.

In the meantime, Kagi is busy tearing down its racks of servers and shredding the hard drives that contain customer and credit card data. Kee has set up an entirely separate Web site and email system to handle support email, which mostly involves sending developers dumps of their license codes and customer data.

It’s a bad time to be a company that relied on Kagi. Payments for June and July will be both delayed and reduced by an unknown amount. Worse, these companies are scrambling to find a new digital commerce solution, such as Avangate, Comecero, FastSpring, and Paddle.

You might wonder why I didn’t include payment processors like PayPal or Stripe in that list. Both are fine choices for certain situations, and they charge lower transaction fees. But there are two big differences between a simple payment processor and a full digital commerce solution such as Kagi and the others provide.

First, digital commerce companies offer full-fledged shopping carts with options for bundles, coupons, subscriptions, order management, refunds, and more. That used to be worth a great deal, but there are now numerous independent Web apps that provide similar features for systems like WordPress, not to mention standalone platforms like Squarespace that offer their own e-commerce capabilities. These apps and platforms all work with systems like PayPal and Stripe.

Second and more important, anyone who sells to customers in other countries has to be aware of the tax implications of doing so. When a company sells to any country in the European Union, along with Canada, Japan, Norway, South Africa, South Korea, Switzerland, and the United States, it may need to pay taxes in that country. The details vary widely, and in some cases (like Canada, Japan, and South Africa), thresholds apply, so a handful of sales won’t matter, but most companies selling to the EU will have to collect and remit value-added tax (VAT).

The full-service digital commerce companies act as the “merchant of record,” which means that end users are actually buying from them, not the company selling the product, and because of that, they handle all tax collection and remittance. That’s hugely helpful for any business in the United States, where sales tax rates vary by state, county, and sometimes even city (but are required only in states where you have a “nexus”). It’s even more important when dealing with international tax authorities — Kee told me that paying Kagi’s VAT taxes to the EU was complex and required personal attention every financial quarter.

Simple payment processors like PayPal and Stripe don’t automatically do anything related to taxes because the company selling the product is the merchant of record. With extra configuration and integration with external services like Taxamo and Avalara, carts that work with PayPal and Stripe can be enhanced to identify the location of each customer in real time, and to calculate and collect the appropriate tax. It’s then up to the company to register for, file, and remit taxes to U.S. states, the EU, and other countries. (Avalara has a service that claims to handle VAT entirely, but I haven’t evaluated whether or not it’s a complete solution or if the pricing is reasonable.)

Put bluntly, I cannot imagine most software developers having the time or expertise to tackle the task of managing taxes. It’s the primary reason we’ve long sold Take Control books and TidBITS memberships through eSellerate (parent company Digital River has eSellerate in maintenance mode, which is why I didn’t include it in the list above). It’s worth giving up a few percent of every sale to have Digital River’s tax team handle everything for us. My strong suspicion is that the vast majority of small companies relying on PayPal and Stripe are just ignoring their international tax responsibilities and hoping they’re small enough to fly under the radar. I have no idea what the liabilities of doing that might be.

Regardless of what companies who previously relied on Kagi end up doing, it’s sad to see the end of such an important player in the history of the Mac, and especially depressing to learn that the reason was an unsuccessful attempt to recover from a situation involving fraud.

 

Fujitsu ScanSnap Scanners — Save your business time and money
with our easy-to-use small ScanSnap Scanner line. Eliminate
paper piles by scanning documents, business cards, and receipts.
Visit us at: <http://budurl.me/sstb>
 

Comments about Kagi Shuts Down After Falling Prey to Fraud
(Comments are closed.)

Laine  An apple icon for a TidBITS Contributor 2016-08-04 14:50
I've trusted Kagi for a long time, and would be willing to help. How many donations of, say, 10 bucks would be significant?
Flash Sheridan  2016-08-05 12:57
+1. Kagi and Kee were good friends in the bygone days of its Newton client, which mainly worked via AOL, written by the late Hardy Macia.
artMonster  2016-08-04 14:56
I'd rather take my chances with a jury of my peers than forced "arbitration". They'd have most likely come out ahead if that had been an option.
Adam Engst  An apple icon for a TidBITS Staffer 2016-08-04 15:14
I have no sense of whether a jury trial would be more or less expensive than a trial before a judge, but my understanding is that binding arbitration is believed to be a lot cheaper in terms of legal fees.
Lamont Dakota  2016-08-04 16:53
Artmonster, _forced_ arbitration means exactly what it says. *Nobody* with a choice would "choose" _forced_ arbitration. In order to do business, Kagi, for some legal reason, had to sign a contract that stated that, if any legal problem arose, it would go *not* to trial, but to arbitration. That's pretty much the death-knell for any organization with a legal division smaller than, say, Apple's. Mandatory arbitration is Big Business's ordinary union-killer.
VaughnSC  2016-08-23 15:24
They received less than the legal fees incurred which "arbitration supposedly reduces" in the first place. If Kagi didn't get near the amount they claimed at arbitration, how can Kee sensibly say Kagi prevailed?
Adam Engst  An apple icon for a TidBITS Staffer 2016-08-23 15:32
The other side was forced to pay money to Kagi, so Kagi "won" in arbitration. But that doesn't mean that Kagi recouped what it wanted, or even as much as was still required for legal fees surrounding the arbitration, cheaper though it may have been than a full lawsuit.
Nicholas Ptacek  2016-08-04 15:27
For any developers looking for an alternate e-commerce platform as as result of the Kagi shut down, we've had a great experience with FastSpring and DevMate. FastSpring handles the actual sales, while DevMate provides licensing and activation options along with analytics, crash reports, and user feedback. The two systems already work seamlessly together providing a great end-user experience, and can handle software sold as a one-time purchase as well as subscription-based sales models. Integrating DevMate's framework into our existing project was really easy, and they have great documentation and example projects available for reference. You can get everything up and running in less than an hour, and I honestly feel that they are the best solution for developers distributing software outside of the Mac App Store. After trying out different e-commerce options we couldn't be more satisfied with the service and support provided by FastSpring and DevMate. Highly recommended!
Adam Engst  An apple icon for a TidBITS Staffer 2016-08-04 15:35
Thanks for sharing your experiences, and I'd encourage others to do the same!
Kevin La Rue  2016-08-11 00:29
Macphun uses FastSpring and has for nearly 18 months. Really easy to set up SKUs, promotions, in-cart suggested add-ons, etc. Great account management and support too! +1 on the recommendation.
JohnB (SciFiOne)   2016-08-04 16:12
Well done article. I especially like the two asides.
Jon Gotow  2016-08-04 18:31
Thanks for the great summary Adam - I'd been wondering what happened behind the scenes. As you may or may not know, I started with Kagi back in 1996, when getting shareware payments still often involved people mailing in checks.

I'm really sad to see this happen. Many of us owe a huge thanks to Kee for starting the service - if it weren't for him, I don't think I would have been able to quit my day job and turn St. Clair Software into a full-time business.

I like the idea of a GoFundMe campaign (or something similar) to help them cleanly shut down - I'd definitely donate as a thank-you for Kagi's many years of trustworthy service.
This is very sad. I just looked through my registrations and found some 50 Kagi items there. Always good service.
Peter N Lewis  An apple icon for a Friend of TidBITS 2016-08-04 21:10
It’s a tragedy for all concerned. As Kagi’s first customer, I whole heartedly agree with Jon, I doubt very much whether I would have been able to spend the last twenty odd years in this business.

Before Kagi, I collected piles of US checks and cash and periodically sent to a US bank account. It was tedious and problematic to say the least, didn’t deal with tax issues, and couldn’t process credit cards.

I switched to FastSpring six years ago, primarily to get better support for coupons, and they have been very good over the years since then.

I feel for the developers caught in this mess, but I'm sure Kee would have done everything possible to avoid this end. A very sad ending to a great company.
I dunno, I don't feel that Kee did everything possible. I've dealt with businesses before that ended up going under, and they gave a warning a few weeks ahead of time so that I'd be able to get set up with a new company and have a smooth transition. Kagi did not do that. In addition to probably losing two whole months of sales, Kagi's users are stuck with no store, and consequently no income, until a new store can be set up. As an additional insult to injury, we were not even given the opportunity to download our customer databases before they shredded the servers. It's sad that Kagi wasn't able to stay in business anymore, but does that really justify treating their longtime loyal customers this way? The cynical part of me feels that they just wanted to take an extra week of sales—money their vendors will never see—to pay their creditors.

Like others here, I placed a lot of trust in Kagi over the years. I'm now wondering whether that trust was misplaced.
Lou Forlini  2016-08-08 15:06
I have to agree, at least in part. I got the shutdown message at 2AM basically telling me that we were immediately out of business for everything we aren't selling through the Apple Store, which includes all of our Windows software. None of what is in the article was ever communicated to me as a vendor. Had I known here was a problem this significant with the service I would have switched long ago.

Of course, I'm sure like many others we now have to support customers who have paid and, through no fault of their own, we have not and probably never will receive payment for.

Further, I have not been advised of this super-secret "entirely separate Web site and email system to handle support email" in order to pull whatever data we have left on their server. Admittedly, we probably have all of it in our own records already since we keep it all as the orders come in. However, it just seems to be another slap in the face to a long-time vendor (since Newton) to read about it here.
Adam Engst  An apple icon for a TidBITS Staffer 2016-08-08 15:58
I don't believe there's anything secret - or even outwardly different - about the new server. It's just that Kagi pulled all the old servers that might contain confidential data.

http://www.kagi.com/ remains the URL, and I imagine that whatever support address you've used in the past is still active.
Lou Forlini  2016-08-10 19:15
I was able to get in touch with Kagi and they very nicely not only provided a couple of data files that I had missed, but all of them going back to the beginning of time.

Of course, we are still going to miss having the service and are working on getting a new payment processor, but I withdraw the complaint I made in the last paragraph of my previous post.
Michael Blake  2016-08-05 04:39
Re Take Control Books: I normally have an uncontrolled reaction to buy new books but haven't done that much recently due to, in my view, not many pertinent books coming along. Also, the base price might be viewed slightly high by some, I'm lucky as I get 30% off. Finally, I've heard some say that moving from a version one to version two book should come at a lower price...

Mike
Adam Engst  An apple icon for a TidBITS Staffer 2016-08-05 10:40
A few responses:

* Obviously, we hope to publish books you'll find pertinent, but it's a tricky thing, given that we basically have to guess at what people will find interesting. We'd love to do a Kickstarter-like approach, but that runs smack into the problem with taxes, since none of the full-service digital commerce companies integrate with IgnitionDeck, which is the main independent crowdfunding solution (and Kickstarter itself doesn't manage tax issues for those who use it). As a result, if we were to try to do a Kickstarter-like campaign, we'd have to run it through an entirely different payment processing system and then handle all the taxes ourselves, which just isn't feasible.

* Our base prices haven't changed in over 10 years. We charge $10 for books that are around 100 pages, $15 for books around 150 pages, and $20 for books that are well over 200 pages. There are occasional exceptions (usually to make the book cheaper). What has changed is that Apple, through the App Store, drove prices for software through the floor, and that infected book prices via the iBooks Store. We've played a little with pricing in the iBooks Store, but dropping the price to $0.99 or the like doesn't result in 15 times more sales; it might just double sales. I can also say that our pricing matches pretty well with the amount we need to make on a successful book for it to be worthwhile. If we charged less, we'd likely just make less, which would make even successful books not worth the effort.

* When we release a new edition of a book, we always offer a discount to owners of the previous edition. The amount of the discount varies depending on how much work the new edition was and how valuable we believe readers will find it after reading the previous book, but it's usually at least 25%, often 50%, and frequently even more. With some edition changes, like the jump from PDFpen 7 to PDFpen 8, we give the new edition away to every previous purchaser for free.

All that said, TidBITS members and MUG members can always save 30%, as can anyone who buys three or more books in an order, so I sincerely hope that price is not an issue.
Dennis B. Swaney  2016-08-09 12:44
Re: the iBookStore. I found that the books prices there are higher than elsewhere. I get my books elsewhere now. Also, since Apple has made it impossible to sync non-Apple sourced ePubs to iBooks on my iDevices via iTunes (fortunately they still allow non-Apple PDFs like Take Control), I'm phasing out iBooks and will move to another ePub & PDF reader.
Michael Blake  2016-08-06 04:17
Thanks for that Adam, I can appreciate the issues. I love to read your books and hope others do too. The app store pricing has done much damage to our overall industry and that is becoming a huge challenge to some of us. I hope to see many more offerings in the future and will be one of the first in line to read them - full price or whatever.

Mike
B. Jefferson Le Blanc  2016-08-09 07:18
I agree. Developers have paid a high price for their dependence on the App Store, particularly in terms of customer satisfaction. Supposedly they get added visibility, but what is that visibility worth competing with hundreds of thousands of titles? The App Store limitations are killing shareware and complicating the whole business of selling software. For those developers who patiently maintain both an App Store and an independent version of their apps, it means supporting dueling versions and dealing with customer confusion over the same.

In the meantime, a common refrain among customers on MacUpdate is, "no try, no buy." Which is a good policy given the proliferation of crapware out there. Just because an app is available in the App Store, doesn't mean it's any good. The same goes for non-App Store software as well, of course.

Given Apple's current popularity, perhaps the number of old timers like me who remember the "good old days" of shareware are aging out. No doubt many younger users have never even heard of shareware. Just like the passing of Kagi, that too is sad.
Dan Daranciang  2016-08-06 11:53
Articles like this make me extraordinarily pleased to be able to support TidBITS, one of the last OG Mac news sites.
Michael Paine  2016-08-08 03:53
Has the Mac App Store influenced these developments?
Adam Engst  An apple icon for a TidBITS Staffer 2016-08-08 09:49
I suspect that the Mac App Store didn't help Kagi, but from what I can tell, it wasn't really a factor.
Raluca Marmureanu  2016-08-08 11:48
Adam, many thanks for mentioning Avangate as one of the full digital commerce solutions that is a fit alternative to all those that need some help while looking for a replacement. As a full disclosure, I am part of the Avangate team.

We’re sorry to see Kagi close its doors especially knowing that they were a true pillar of growth for many vendors in the times of shareware / lifetime licenses. While those were the days, some of their competitors transitioned to newer models just like their clients and are thriving with their capabilities as more than payment providers with APIs for SaaS, online services and software on premise with renewals.

Just as you mentioned, Avangate is also the merchant of record, eliminating all issues related to local sales taxation, regulations, currency exchange and other account services.
Raluca Marmureanu  2016-08-08 11:49
Therefore, if you sell software, SaaS or any other digital goods, Avangate is a full service provider, solving the complexity of online commerce, subscription billing, distribution channels and global payments, while offering you complete control over the shopping experience along with support to optimize the cart to boost conversion rates. As the merchant of record, we take full responsibility for managing processors relationships and regulations, work closely with them as partners, hence Risk department and processes are an important function in assessing type of vendors we work with and managing anti-fraud, customer support and chargebacks reduction.

For anyone interested in learning more, I advise you to check out the customer testimonials http://www.avangate.com/customers/ and also the reviews on G2Crowd https://www.g2crowd.com/products/avangate/reviews

Good luck!
Thomas Tempelmann  2016-08-08 14:35
Nice to see some other oldsters here, hi Flash!

Kagi was my first online payment processor, around the turn of the century. I earned a nice amount of money back then, and it would have been difficult without Kagi.

Sadly, for me, Kagi did not manage to keep their software competitive for a long time in this new millenium, and eventually I had a peek at FastSpring (which, supposedly, was created by people leaving eSellerate after that went down the hill), where things worked much more smoothly. Soon after that, Kagi came out with a new design (looked like a rewrite), but then it was too late to go back - I was now happy with FS. I always felt a little bad for that.

It appears to me Kagi had a long and slow decline, losing customers constantly. When asking for a payment processor, people recommended FS often and hardly ever Kagi - it got pretty much forgotten.

Regardless, Kee kept giving advice on the macsb mailing list, while never trying to push his own service.

Oops, out of space
Adam Engst  An apple icon for a TidBITS Staffer 2016-08-08 17:22
FastSpring wasn't primarily refugees from eSellerate, I don't believe, since one of the founders was Jason Foodman, who wasn't from eSellerate. He's now head of Global Delight.

What I've observed is that digital commerce companies fall into generations. Kagi was a first-generation company, as was eSellerate. There were a few others. Digital River bought a number of those early companies, including eSellerate. FastSpring and Avangate seem to me to be second-generation companies, or at least to have evolved more successfully. Paddle and now Comecero strike me as third-generation companies.

I'm not implying any quality differences here - it's just that a digital commerce company builds systems at a particular point in time, and it can be very hard to update those as times change. Often the same people who started one company come back into the field to start another, once the conditions are different.
Trevor Black  2016-08-09 13:34
Thanks for the shout out, Adam, and a great article offering more details of how Kagi ended up where it did.

Full disclosure: I am a Co-Founder of Comecero, a next gen API based commerce and payments solution. New kids on the block related to our platform but built by a team who has been involved in online commerce for over 20 years. (We are among those who sold companies to Digital River.)

We are now helping online sellers, including those who were using Kagi, get set up to sell around the world. Using modern architecture and design methodologies we encourage anyone interested to kick our tires. Join others by doing an A/B test to increase your sales while maintaining control. Turnkey or build to suit options sitting on a restful API give you the flexibility others don't.

Sign up or live chat with us - https://comecero.com
Trevor Black  2016-08-10 18:19
Incidentally, we are holding meet and greet events in California in the next two weeks (San Diego Aug 16th, LA Aug 18th, San Francisco Aug 22nd) if anyone is interested, if so contact us for details.
Matt Butch  2016-08-08 17:52
Sad to see Kagi go down. I know I've bought a lot of software that used them.

I use eSellerate for my software, but as you said, development has longed since ceased. On one page in their control panel, they have wording like "On April 26, 2011, we've temporarily enabled blah blah". That's still up, and nothing's changed in 5 years.

I think its time I switched, so thanks for the list to investigate.
It is a shame, I used Kagi both as a customer and a supplier and they worked very well. I don't think there is a problem in supplying to countries with strict VAT policies it is more a problem for the customer. In scanadnavian countries, my understanding is they are generally required to declare that they have imported goods and pay the tax unless it has already been paid. Therefore the advantage of using Kagi was that it provides an easy way for the customers to pay the tax.
Lynn Fredricks  2016-08-09 11:56
The charge-back is one of those credit card issues that should be addressed by way of a massive lawsuit such as the credit card companies have experienced before. There is nothing stopping any purchaser from initiating a charge back, instead of requesting a return. When that happens, processors will hit the merchant with a $25-$30 fee per transaction - no matter how it is resolved. Even if the customer changes their mind later, the merchant is still on the hook for that cost. Consider the impact of that if you are selling a product under, say, $50, like so many smaller software vendors do.

Marc Heusser  2016-08-09 12:04
It is very sad to see Kagi go down - they deserved better than that. I would certainly help Kee if necessary. I trust he has done everything he could.

I have bought my first license 1994 from their first customer Peter Lewis (https://www.stairways.com/main/history) and my last a few weeks ago.

I wish them all the best - and hope they will recover personally. And that all the shareware developers may find a good way out as well.

In my experience FastSpring and Apple are the preferred replacements.
Michael Finney  2016-08-09 13:16
I'm especially sad because I had just bought a license to Graphic Converter 10 through Kagi, and it looks like Lemkesoft will not get the full payment. Thorsten Lemke makes great software, and on top of that is incredibly competent and responsive as a developer. I hate to see him get hurt!
Michael Bernstein  2016-08-09 17:24
We had used Kagi for many years, and I strongly feel this could have been handled far better. It took a week of setting aside everything else to get our software moved over to FastSpring and fix all of the links to our Kagi store that are under our control. Plenty of links are not under our control. Kagi could have given us some advance notice, could have left our Kagi store page up instead of a sudden 404, could have provided a 404 page that didn't leave us looking bad to our customers (since we were telling our customers to go there), and could have let us put a redirect (or explanatory text with a new link) on our Kagi store page once we had somewhere new to steer people.
Hank Roberts  2016-08-09 19:15
> a legal consulting service

Who? Might I guess it's the predatory legal services company that's been calling my elderly neighbor trying to sell their services? A name couldn't hurt.
Michael Bernstein  2016-08-11 23:57
As a Kagi supplier, our contract with Kagi gave them the right to sell our software as long as they then sent us the appropriate amount of money. Once Kagi knew they weren't going to do that, they no longer had the right to sell our software. I don't see how sales in those final weeks were legal.
Mike McGee  2016-08-10 15:43
I've been a developer who used Kagi since the 90's. (Yes, I'm old.) I have a shareware application that is actually still active and was still getting monthly checks from Kagi.

I was more saddened than anything to hear about Kagi's demise, especially due to fraud that they couldn't recover from.

Has there ever been a more fitting scenario to where developers could have rallied around to save Kagi a la George Bailey in It's a Wonderful Life? I would have been more than happy to chip in financially if it could have saved Kagi. I wish I was given the opportunity, and Kagi will be missed.
B Hunter  2016-08-14 21:28
Do not be fooled into thinking you have to collect and then pay to the EU the EU/VAT tax for EU/GB customers if you have no business locations in the EU itself. We contacted the Australian Tax Office and told them the situation (a Kagi-like payment operator was insisting they collect the payments), and they said there is no tax treaty that allows this and that no Australian business has to collect foreign taxes for those countries. In the US maybe it would be like California wanting you to collect taxes for them when you are an IL based only company. Anyway I would definitely contact you local tax office to clarify for your situation.
Kristofer Szymanski  2016-08-15 15:47
Kee Nethery wrote to me that "Kagi ran out of money" and that "he is sorry".

What do you mean "ran out of money”, Kee Nethery? What about all the money you received during June and July? Where's MY money? What have you spent MY money on? Can you please answer this question?

The simple fact is that Kee Nethery owns me money, and if he will not pay me, he is a criminal that was selling other people's software for two months just to steal the money.
I would like to know why did Kagi continue collecting others money for two months_after_ they figured they are bankrupt (i.e. in early June)?

They are owing us now more than 200K USD.




VaughnSC  2016-08-23 16:00
Im still confused with this 'fraud story': Kagi always, to my knowledge, pays sales roughly a month after the fact and deducts returns and chargebacks first. Returns can only happen in a 30 day window, chargebacks 60-to-90.
Kagi fumbled badly if they paid the client and dropped them with a tsunami of chargebacks in the queue. The sheer amounts suggest the 'supplier' achieved nearly 100% chargebacks, certainly 'beyond the pale', and could suggest bad faith by asking customers to chargeback out of spite. Average 20,000 transactions, $29+$25 makes for almost $1MM the worst case first month and another $500K for the next two.

Frankly Kee had years to reincorporate company and reorganize the debt.

Which reminds me, do I remember Kagi hiking the chargeback fee? That may have been the deal they cut with V/MC over the blacklist. Thatand, and/or agreeing (under duress) to pay them 100 cents on the dollar for the 'debt'.

I'm now thinking Kee was too nice and bent over too far!
Patrick  2016-09-01 14:24
I've been using Kagi for years and was shocked to get the email saying they suddenly went out of business, owing me 2 months worth of sales. I'm glad I'm just a one-man show and didn't have to pay employees or I'd be out of business as well. I'm guessing I'll be lucky to get anything at all from the ABC handling Kagi's creditors and I guess it will be 6 months before I do. Not going to hold my breath. I'm just glad I never closed my account with Share-It. I just had to update my products and change my sales links, which I was able to do almost overnight. I can't imagine what a nightmare this must have been for larger companies with lots of employees and that may not be as nimble. So does the state of California oversee the ABC and ensure that we get a fair payout? Or are we at the mercy of that company's idea of who gets what? I've not heard a peep from them so far.
Patrick  2016-09-01 20:03
Right after I posted this comment I heard from the ABC. Have to send them a claim form. That's encouraging at least!