VERIFIED AMENDED STOCKHOLDER DERIVATIVE COMPLAINT 

Lead Case No. 3:17-cv-00162-RS 

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ROBBINS ARROYO LLP 

BRIAN J. ROBBINS (190264) 

FELIPE J. ARROYO (163803) 

SHANE P. SANDERS (237146) 

SCOTT F. TEMPLETON (246872) 

600 B Street, Suite 1900 

San Diego, CA 92101 

Telephone: (619) 525-3990 

Facsimile: (619) 525-3991 

brobbins@ robbinsarroyo.com 

farroyo@ robbinsarroyo.com 

ssanders@robbinsarroyo.com 

stempleton@robbinsarroyo.com 

Co-Lead Counsel for Plaintiffs 

[Additional Counsel on Signature Page] 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

IN RE PAYPAL HOLDINGS, INC. 

SHAREHOLDER DERIVATIVE LITIGATION 

Lead Case No. 3:17-cv-00162-RS 

(Consolidated with No. 3:17-cv-02206-RS; 

3:17-cv-02428-RS; and 5:17-cv-02446-RS) 

VERIFIED AMENDED STOCKHOLDER 

DERIVATIVE COMPLAINT 

This Document Relates To: 

ALL ACTIONS

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Plaintiffs Edith Liss, Steve Sims, Stephen Silverman, Iron Workers Local No. 25 Pension 

Fund and Steve Seeman (collectively, "Plaintiffs") by and through their attorneys, submit this 

Verified Amended Stockholder Derivative Complaint for Violation of Securities Law, Breach of 

Fiduciary Duty, Waste of Corporate Assets, and Unjust Enrichment. The allegations herein are 

based upon Plaintiffs' personal knowledge as to their own facts, and upon information and belief 

as to all other matters, based on, among other things, the investigation made by and through their 

counsel and a review of publicly available information, including counsel's review of press 

releases and U.S. Securities and Exchange Commission ("SEC") filings.

NATURE AND SUMMARY OF THE ACTION 

1. This is a stockholder derivative action brought on behalf of nominal defendant 

PayPal Holdings, Inc. ("PayPal" or the "Company") against certain of its officers and directors 

for violation of federal securities law, breaches of fiduciary duties, and other wrongdoing. These 

wrongs resulted in billions of dollars in damages to PayPal's reputation, goodwill, and standing 

in the business community. Moreover, these actions have exposed the Company to billions of 

dollars in potential liability for violations of state and federal law. 

2. In 2013, eBay Inc. ("eBay") bought startup company, Braintree, for $800 million 

in cash. Braintree helped a number of web and mobile device companies process payments. 

However, the company was mostly known for its Venmo smartphone application, which allowed 

people to pay each other through text messages. eBay placed Braintree, and its application 

Venmo, under its then-wholly owned subsidiary, PayPal. In 2015, eBay spun off PayPal into a 

separate publicly traded company. As part of the spinoff, eBay's stockholders received one share 

of PayPal stock for each share of eBay stock that they owned. 

3. Unbeknownst to the public in general or eBay and PayPal's outside stockholders, 

Venmo was engaged in unfair and deceptive business practices in violation of state and federal 

law. At a minimum, Venmo used its customers' phone contacts without disclosing how those 

contacts would be used, did not clearly disclose how customers' transactions and interactions 

with other users would be shared, and misrepresented that communication from Venmo was 

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actually from a Venmo customer. Venmo's illegal actions led to inflated results for PayPal, first 

as a subsidiary of eBay and then later as a standalone company, as the Company's results did not 

represent its business as if it operated legally and there was no indication of Venmo's illegal 

practices in any of PayPal's public filings. 

4. Venmo's illegal practices recently led to an action by the State of Texas against 

the Company. PayPal settled this action with a payment to Texas and certain improvements in 

Venmo's disclosures to its customers. In addition, the Federal Trade Commission ("FTC") has 

initiated an investigation to determine whether Venmo engaged in deceptive or unfair practices 

in violation of the Federal Trade Commission Act. Thus far, the FTC has served a civil 

investigative demand ("CID") on PayPal, demanding the Company produce documents and 

provide answers to written questions about Venmo's service. 

5. In the wake of the partial disclosure of Venmo's illegal business practices, 

PayPal's stock plunged, erasing over $1 billion in market capitalization in a single day. 

6. Further, after PayPal received the CID, but before its disclosure to the public, the 

Board of Directors (the "Board") of PayPal issued a proxy statement to the Company's 

stockholders asking that they vote to reelect the members of the Board. The Board made no 

mention of the CID or Venmo's illegal practices in the proxy. In fact, the Board did just the 

opposite, littering the proxy with discussion about the Company's strong corporate governance 

and the Board members' monitoring of PayPal. The Board members made these statements to 

justify their continued role as directors of the Company. As the members of the Board should 

have known, however, the Company was engaged in illegal activities and did not have "strong" 

governance, rendering these proxy statements false and misleading. These negligently-made 

material misstatements are a violation of federal securities laws. The statements were also an 

essential link to the Board member's reelection. 

7. In light of the above, Plaintiffs now bring this action to hold the Individual 

Defendants (as defined herein) accountable for their illegal actions. 

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8. PayPal's Board has not taken legal action against defendants for the misconduct 

alleged herein. Accordingly, between January and October 2017, Plaintiffs commenced 

shareholder derivative litigation on behalf of PayPal seeking to hold defendants accountable for 

the damages sustained by the Company. PayPal moved to dismiss the operative complaint on the 

grounds that plaintiffs had not made a demand upon the PayPal Board. On January 18, 2018 the 

Court dismissed the complaint for failure to make a demand on the PayPal Board, with leave to 

amend. On February 15, 2018, to cure this perceived pleading defect, Plaintiffs served a 

litigation demand (the "Demand") upon the PayPal Board and thereafter forwarded the Demand 

to counsel representing PayPal and the Individual Defendants. A copy of the Demand is attached 

hereto as Exhibit A. 

JURISDICTION AND VENUE 

9. Pursuant to Article III, Section 2 of the United States Constitution and 28 U.S.C. 

§1331 of the Securities Exchange Act of 1934 (the "Exchange Act"), this Court has jurisdiction 

over the claims asserted herein for violations of section 14(a) of the Exchange Act. This Court 

has supplemental jurisdiction over the remaining claims under 28 U.S.C. §1367. The other 

claims in this action are so related to the section 14(a) claims that fall within this Court's original 

jurisdiction that they form part of the same case or controversy under Article III, Section 2 of the 

United States Constitution. 

10. This Court has jurisdiction over each defendant named herein because each 

defendant is either a corporation that conducts business in and maintains operations in this 

District, or is an individual who has sufficient minimum contacts with this District to render the 

exercise of jurisdiction by the District courts permissible under traditional notions of fair play and 

substantial justice. 

11. Venue is proper in this Court in accordance with 28 U.S.C. §1391(a) because: 

(i) PayPal maintains its principal place of business in this District; (ii) one or more of the 

defendants either resides in or maintains executive offices in this District; (iii) a substantial 

portion of the transactions and wrongs complained of herein, including the defendants' primary 

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participation in the wrongful acts detailed herein, and aiding and abetting and conspiracy in 

violation of fiduciary duties owed to PayPal, occurred in this District; and (iv) defendants have 

received substantial compensation in this District by doing business here and engaging in 

numerous activities that had an effect in this District. 

INTRADISTRICT ASSIGNMENT 

12. This action is properly assigned to the San Jose division of this Court. 

THE PARTIES 

Plaintiffs 

13. Plaintiff Edith Liss received her PayPal stock in the Company's spinoff from eBay 

and has continuously held PayPal stock since that time. 

14. Plaintiff Steve Sims received his PayPal stock in the Company's spinoff from 

eBay and has continuously held PayPal stock since that time. 

15. Plaintiff Stephen Silverman received his PayPal stock in the Company's spinoff 

from eBay and has continuously held PayPal stock since that time. 

16. Plaintiff Iron Workers Local No. 25 Pension Fund received its PayPal stock in the 

Company's spinoff from eBay and has continuously held PayPal stock since that time. 

17. Plaintiff Steve Seeman received his PayPal stock in the Company's spinoff from 

eBay and has continuously held PayPal stock since that time. 

Nominal Defendant 

18. Nominal Defendant PayPal is a Delaware corporation with principal executive 

offices located at 2211 North First Street, San Jose, California. PayPal offers technology 

platforms which allow consumers and merchants to make digital and mobile payments. PayPal's 

technology platforms include PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant. 

PayPal generates revenues by charging fees for providing transaction processing and other 

payment-related services. On July 17, 2015, PayPal became an independent publicly traded 

company through the pro rata distribution by eBay of 100% of the outstanding common stock of 

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PayPal to eBay's stockholders. As of December 31, 2016, PayPal employed approximately 

18,100 people worldwide. 

Defendants 

19. Defendant Daniel Schulman ("Schulman") is PayPal's President, Chief Executive 

Officer ("CEO"), and a director and has been since July 2015. Defendant Schulman was also 

PayPal's President and CEO-Designee from September 2014 to July 2015. Defendant Schulman 

knowingly, recklessly, or with gross negligence made improper statements in the Company's 

press releases and public filings. PayPal paid defendant Schulman the following compensation 

as an executive: 

Year Salary 

Stock 

Awards 

Option 

Awards 

Non-Equity 

Incentive Plan 

Compensation

All Other 

Compensation Total 

2016 $1,000,000 $13,453,388 - $3,140,000 $1,340,953 $18,934,341

2015 $942,308 $8,825,674 $1,537,111 $2,374,615 $764,783 $14,444,491

20. Defendant John Rainey ("Rainey") is PayPal's Senior Vice President and Chief 

Financial Officer ("CFO") and has been since August 2015. Defendant Rainey knowingly, 

recklessly, or with gross negligence made improper statements in the Company's press releases 

and public filings. PayPal paid defendant Rainey the following compensation as an executive: 

Year Salary 

Stock 

Awards 

Option 

Awards 

Non-Equity 

Incentive Plan 

Compensation

All Other 

Compensation Total 

2016 $650,000 $4,139,520 - $979,875 $4,165,313 $9,934,708 

2015 $212,500 $8,369,049 $706,251 $241,188 $1,153,558 $10,682,546

21. Defendant John Donahoe ("Donahoe") is PayPal's Chairman of the Board and a 

director and has been since July 2015. Defendant Donahoe was also eBay's President and CEO 

from March 2008 to July 2015 and an eBay director from January 2008 to July 2015. Defendant 

Donahoe knowingly or recklessly made improper statements in the Company's press releases and 

public filings. While in possession of material, nonpublic information concerning PayPal's true 

business health, defendant Donahoe sold 1,830,584 shares of his stock for $70,273,773.04 in 

proceeds. PayPal paid defendant Donahoe the following compensation as a director: 

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Fiscal 

Year Fees Paid in Cash Stock Awards Total 

2016 $180,000 $320,003 $500,003 

2015 $90,000 - $90,000 

22. Defendant David Moffett ("Moffett") is PayPal's Lead Independent Director and a 

director has been since June 2015. Defendant Moffett was also an eBay director from July 2007 

to July 2015. Defendant Moffett is the Chairman of PayPal's Audit, Risk and Compliance 

Committee and has been since July 2015. Defendant Moffett knowingly or recklessly made 

improper statements in the Company's press releases and public filings. PayPal paid defendant 

Moffett the following compensation as a director: 

Fiscal 

Year Fees Paid in Cash Stock Awards Total 

2016 $193,000 $220,002 $413,002 

2015 $68,500 - $68,500 

23. Defendant Pierre Omidyar ("Omidyar") is a PayPal director and has been since 

July 2015, and an eBay director and has been since May 1996. Defendant Omidyar founded 

eBay in September 1995 and was also eBay's Chairman of the Board of Directors from May 

1996 to July 2015. Defendant Omidyar knowingly or recklessly made improper statements in 

the Company's press releases and public filings. 

24. Defendant Gail McGovern ("McGovern") is a PayPal director and has been since 

June 2015. Defendant McGovern was also an eBay director from March 2015 to July 2015. 

Defendant McGovern is a member of PayPal's Audit, Risk and Compliance Committee and has 

been since July 2015. Defendant McGovern knowingly or recklessly made improper statements 

in the Company's press releases and public filings. PayPal paid defendant McGovern the 

following compensation as a director: 

Fiscal 

Year Fees Paid in Cash Stock Awards Total 

2016 $113,000.00 $220,002 $333,002 

2015 $56,500 - $56,500 

25. Defendant Frank Yeary ("Yeary") is a PayPal director and has been since July 

2015. Defendant Yeary was also an eBay director from January 2015 to July 2015. Defendant 

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Yeary is a member of PayPal's Audit, Risk and Compliance Committee and has been since July 

2015. Defendant Yeary knowingly or recklessly made improper statements in the Company's 

press releases and public filing. PayPal paid defendant Yeary the following compensation as a 

director: 

Fiscal 

Year Fees Paid in Cash Stock Awards Total 

2016 $98,000 $220,002 $318,002 

2015 $49,000 - $49,000 

26. Defendant David Dorman ("Dorman") is a PayPal director and has been since 

June 2015. Defendant Dorman was also an eBay director from June 2014 to July 2015. 

Defendant Dorman knowingly or recklessly made improper statements in the Company's press 

releases and public filings. PayPal paid defendant Dorman the following compensation as a 

director: 

Fiscal 

Year Fees Paid in Cash Stock Awards Total 

2016 $110,000 $220,002 $330,002 

2015 $52,500 - $52,500 

27. Defendant Jonathan Christodoro ("Christodoro") is a PayPal director and has been 

since July 2015. Defendant Christodoro was also an eBay director from March 2015 to July 

2015. Defendant Christodoro knowingly or recklessly made improper statements in the 

Company's press releases and public filings. PayPal paid defendant Christodoro the following 

compensation as a director: 

Fiscal 

Year Fees Paid in Cash Stock Awards Total 

2016 $98,000 $220,002 $318,002 

2015 $46,000 - $46,000 

28. Defendant Wences Casares ("Casares") is a PayPal director and has been since 

January 2016. Defendant Casares knowingly or recklessly made improper statements in the 

Company's press releases and public filings. PayPal paid defendant Casares the following 

compensation as a director: 

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Fiscal 

Year Fees Paid in Cash Stock Awards Total 

2016 $95,055 $220,002 $315,057 

29. Defendant Patrick Dupuis ("Dupuis") was PayPal's Senior Vice President and 

Interim CFO from July 2015 to August 2015. Defendant Dupuis was also PayPal's CFO from 

November 2010 to July 2015. Defendant Dupuis knowingly, recklessly, or with gross 

negligence made improper statements in the Company's press releases and public filings. PayPal 

paid defendant Dupuis the following compensation as an executive: 

Year Salary 

Stock 

Awards 

Option 

Awards 

Non-Equity 

Incentive Plan 

Compensation

All Other 

Compensation Total 

2015 $1,050,000 $1,639,465 $309,566 $429,975 $10,600 $3,439,606

30. The defendants identified in ¶¶19-20, 29 are referred to herein as the "Officer 

Defendants." The defendants identified in ¶¶19, 21-28 are referred to herein as the "Director 

Defendants." The defendants identified in ¶¶22, 24-25 are referred to herein as the "Audit, Risk 

and Compliance Committee Defendants." Collectively, the defendants identified in ¶¶19-29 are 

referred to herein as the "Individual Defendants." 

DUTIES OF THE INDIVIDUAL DEFENDANTS 

Fiduciary Duties 

31. By reason of their positions as officers and directors of the Company, each of the 

Individual Defendants owed and owe PayPal and its stockholders fiduciary obligations of loyalty 

and good faith, and were and are required to use their utmost ability to control and manage 

PayPal in a fair, just, honest, and equitable manner. The Individual Defendants were and are 

required to act in furtherance of the best interests of PayPal and not in furtherance of their 

personal interest or benefit. 

32. To discharge their duties, the officers and directors of PayPal were required to 

exercise reasonable and prudent supervision over the management, policies, practices, and 

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controls of the legal and financial affairs of the Company. By virtue of such duties, the officers 

and directors of PayPal were required to, among other things: 

(a) accurately inform stockholders of material events and business practices 

affecting the Company's financial results; 

(b) act only in the best interests of the Company, not their own interests; 

(c) conduct the affairs of the Company in an efficient, business-like manner in 

compliance with all applicable laws, rules, and regulations so as to make it 

possible to provide the highest quality performance of its business, to 

avoid wasting the Company's assets, and to maximize the value of the 

Company's stock; and 

(d) remain informed as to how PayPal conducted its operations, and, upon 

receipt of notice or information of imprudent or unsound conditions or 

practices, make reasonable inquiry in connection therewith, and take steps 

to correct such conditions or practices and make such disclosures as 

necessary to comply with applicable laws. 

33. In addition, PayPal adopted a code of ethics. The Company's Code of Business 

Conduct & Ethics (the "Code of Conduct") is supposed to "provide[] guidance on how we should 

conduct our business for the benefit of ourselves, our colleagues, our Company, our customers, 

our suppliers and our stockholders." 

34. The Code of Conduct highlights the obligation of the Company and its employees 

and directors to comply with the law, stating "We are accountable for our actions and we honor 

our commitments. Our shared goal of honest and ethical action in everything we do drives our 

success. We are committed to ensuring that every action we take is in full compliance with the 

law – and in keeping with our ethics." 

35. Concerning "Making Ethical Decisions," the Code of Conduct states that: 

When you face difficult decisions at PayPal, take the time to think and consider 

the legal and ethical issues. Don't give in to pressure and rush your decision. 

Carefully consider the implications of your actions. Always ask: 

• Is it honest and fair? 

• Is it consistent with the Code and the law? 

• Does it make you feel good about yourself and the Company? 

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• Would you feel comfortable reading about your action if it is reported in the 

media? 

36. The Code of Conduct also acknowledges the obligation for directors and officers 

for themselves and the Company to keep "Accurate Accounts and Records," and, in particular, 

states: 

We have an obligation to our business, stockholders and others who rely on us, to 

ensure that our accounts and records are always complete, accurate, timely, and 

understandable. These records are critical for internal decision making, and for 

reporting to government agencies and the market. Accurate records protect our 

reputation for integrity. 

This means that we never falsify, forge, backdate, or improperly alter any 

Company document. We ensure that all transactions are lawful, recorded in the 

proper account, and in accordance with all Company internal controls. All reports 

to regulatory authorities must be full, fair, accurate, timely and understandable. 

37. The Code of Conduct provides, as to "Public Statements and Endorsements," that: 

We speak with one voice when communicating about PayPal to the media, 

financial analysts, or investors. Inaccurate statements can create serious risks for 

the Company, including claims of false advertising, misrepresentation, breach of 

contract, securities fraud and antitrust violations. 

38. The Code of Conduct also discusses the need for privacy for the Company's 

customers, especially given the sensitive nature of PayPal's business. In particular, the Code of 

Conduct states: 

Customers who entrust us with their personal information expect us to protect 

their privacy. Privacy matters at PayPal. We all must be focused on our 

customers, compliance and doing the right thing. Depending on your job 

responsibilities you may have access to our customers' personal data, including 

their contact details, financial account information and transaction data. We must 

safeguard our customers' information. We collect, access, use, store, transfer and 

share our customers' information only for legitimate business purposes, and 

always in accordance with our privacy and information security policies and 

applicable laws, rules and regulations, including data protection laws. In 

particular, PayPal has made commitments to data protection regulators in Europe 

that we, globally, will comply with certain binding rules designed to protect our 

Users' Personal Information. 

We do not share customer information with third parties, or any colleague who 

doesn't have a business need to know. If there is a legitimate business need to 

share confidential information with a third party, they must first enter into an 

appropriate legal agreement, with confidentiality, privacy and security provisions, 

approved by the PayPal Legal and Privacy Teams. 

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39. The Code of Conduct addresses how the Company should treat advertising, 

stating: 

Every claim in our advertisements and marketing materials must be accurate, 

objective and verifiable. This means that we must research and document our 

claims prior to publication. Laws governing comparative advertising, including 

pricing, vary from country to country, so it's important to obtain guidance from 

Legal when making such claims to ensure that we comply with applicable laws. 

Advertising and marketing using social media also is subject to various 

regulations. Please consult our Social Media Policy and Legal for more 

information. 

We do not make false or misleading claims. Legal can provide guidance if you are 

unsure whether something is false or misleading. 

Breaches of Duties 

40. The conduct of the Individual Defendants complained of herein involves a 

knowing and culpable violation of their obligations as officers and directors of PayPal, the 

absence of good faith on their part, and a reckless disregard for their duties to the Company that 

the Individual Defendants were aware or reckless in not being aware posed a risk of serious 

injury to the Company. 

41. The Individual Defendants breached their duty of loyalty and good faith by 

allowing defendants to cause, or by themselves causing, the Company to engage in issuance of 

the misleading statements, the illegal business practices, the attempted release of their own 

liability, improper practices that wasted the Company's assets, and caused PayPal to incur 

substantial damage. 

42. The Individual Defendants, because of their positions of control and authority as 

officers and directors of PayPal, were able to and did, directly or indirectly, exercise control over 

the wrongful acts complained of herein. The Individual Defendants also failed to prevent the 

other Individual Defendants from taking such illegal actions. As a result, and in addition to the 

damage the Company has already incurred, PayPal has expended, and will continue to expend, 

significant sums of money. 

Additional Duties of the Audit, Risk and Compliance Committee Defendants 

43. In addition to these duties, under its Charter in effect, the Audit, Risk and 

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Compliance Committee Defendants, defendants McGovern, Moffett and Yeary, owed specific 

duties to PayPal to assist the Board in overseeing the Company. Specifically, the Audit, Risk 

and Compliance Committee's Charter provides: 

The Audit, Risk and Compliance Committee ... shall provide assistance and 

guidance to [the Board] in fulfilling its oversight responsibilities to the Company's 

stockholders with respect to (i) the Company's corporate accounting and financial 

reporting practices, ... (iv) the quality and integrity of the Company's financial 

statements and reports, ... (vii) overseeing the Company's overall risk framework 

and risk appetite framework and (viii) the Company's compliance with legal and 

regulatory requirements. In discharging these obligations, the Committee shall 

maintain and foster an open avenue of communication between the Committee 

and the independent auditors, the Company's financial management and internal 

auditors. 

44. Under the Audit, Risk and Compliance Committee's Charter, the members' duties 

include: 

Review, upon completion of the audit, the financial statements to be included in 

the Company's Annual Report on Form 10-K; 

* * * 

Review with the Company's Chief Business Affairs & Legal Officer and/or Chief 

Compliance Officer, as applicable, any significant legal, compliance or regulatory 

matters that could have a material impact on the Company's financial statements 

or the Company's business, financial statements or compliance policies, including 

material notices to or inquiries received from governmental agencies; 

* * * 

Discuss earnings press releases; 

Review and discuss with management the Company's major risk exposures, 

including financial, operational, privacy, security, business continuity legal and 

regulatory risks, the steps the Company has taken to monitor, control, and manage 

and such exposures, and the Company's risk assessment and risk management 

policies; and regularly report to the Board the substance of such reviews and 

discussions; 

45. The Audit, Risk and Compliance Committee's members' responsibilities as it 

comes to compliance were particularly robust under the Audit, Risk and Compliance Committee 

Charter. The Audit, Risk and Compliance Committee Charter stated that the members of the 

Audit, Risk and Compliance Committee must: 

(a) Periodically review the Company's Enterprise-Wide Compliance Risk 

Management Policy; 

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(b) Periodically review the Company's Global Anti-Money Laundering and 

Sanctions Policy; 

(c) Review the Company's Annual Compliance Plan; 

(d) Review periodic reports from the Chief Compliance Officer, and other 

members of management as appropriate, regarding ongoing enhancements 

to, and overall effectiveness of, the Company's Enterprise-Wide 

Compliance Risk Management Program and the Company's Anti-Money 

Laundering and Sanctions Program; 

(e) Review management actions on significant compliance matters (e.g., 

actions taken to remediate significant compliance issues, progress of major 

compliance initiatives, and remediation progress of open regulatory 

actions) and the Company's compliance with applicable law and 

regulation; 

(f) Receive regulatory authorities' significant examination reports, or 

summaries of the same; 

(g) Receive reporting on any key organizational changes to ensure the 

Company's Compliance function has the appropriate size, skills, stature, 

and independence; 

(h) Receive and discuss reports from management regarding significant 

reported ethics violations under the Company's Code of Business Conduct 

and other corporate governance policies; 

(i) Receive and review reports on selected compliance topics as management 

or the committee deems appropriate; 

(j) Periodically review the Company's Code of Business Conduct; and 

(k) Review all requests for waivers of the Code of Business Conduct 

involving directors, executive officers, and executive staff members and 

make recommendations to the Board as to whether it should approve any 

such request. 

46. Concerning the Company's risk compliance, the Audit, Risk and Compliance 

Committee Charter requires the Audit, Risk and Compliance Committee members to: 

(a) Review the Company's overall risk management framework, including 

policies and practices established by management to identify, assess, 

measure and manage key risks facing the Company, including financial 

crimes risk, regulatory compliance risk, information security, technology 

risk, operational risk (including fraud losses), credit risk, market risk 

(including capital and liquidity), reputational risk, and strategic risk; 

(b) Review the Company's risk appetite framework which will support the 

Company's strategic plan, goals, and objectives; 

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(c) Periodically review the Company's overall Risk Management Policy and 

other risk management policies, as appropriate; 

(d) Receive management reports regarding management's assessment of the 

effectiveness of the Company's overall risk program, including corrective 

actions taken by management to address risk issues (including those 

identified by management, internal audit, or regulatory reviews), the 

progress of key risk initiatives and the implementation of risk management 

enhancements; 

(e) Receive reporting on any key organizational changes to ensure the 

Company's Risk function has the appropriate size, skills, stature and 

independence; and 

(f) Receive and review reports on selected risk topics as management or the 

Committee deems appropriate. 

CONSPIRACY, AIDING AND ABETTING, AND CONCERTED ACTION 

47. In committing the wrongful acts alleged herein, the Individual Defendants have 

pursued, or joined in the pursuit of, a common course of conduct, and have acted in concert with 

and conspired with one another in furtherance of their common plan or design. In addition to the 

wrongful conduct herein alleged as giving rise to primary liability, the Individual Defendants 

further aided and abetted and/or assisted each other in breaching their respective duties. 

48. During all times relevant hereto, the Individual Defendants, collectively and 

individually, initiated a course of conduct that was designed to and did: (i) deceive the investing 

public, including stockholders of PayPal, regarding the Individual Defendants' management of 

PayPal's operations, including its subsidiary, Venmo; (ii) mislead the public about PayPal's 

compliance with applicable laws; and (iii) enhance the Individual Defendants' executive and 

directorial positions at PayPal and the profits, power, and prestige that the Individual Defendants 

enjoyed as a result of holding these positions. In furtherance of this plan, conspiracy, and course 

of conduct, the Individual Defendants, collectively and individually, took the actions set forth 

herein. 

49. The Individual Defendants engaged in a conspiracy, common enterprise, and/or 

common course of conduct. During this time, the Individual Defendants caused the Company to 

issue improper financial statements described herein. 

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50. The purpose and effect of the Individual Defendants' conspiracy, common 

enterprise, and/or common course of conduct was, among other things, to disguise the Individual 

Defendants' violations of law, breaches of fiduciary duty, waste of corporate assets, and unjust 

enrichment; and to conceal adverse information concerning the Company's operations, financial 

condition, and future business prospects. 

51. The Individual Defendants accomplished their conspiracy, common enterprise, 

and/or common course of conduct by causing the Company to purposefully or recklessly release 

improper statements. Because the actions described herein occurred under the authority of the 

Board, each of the Individual Defendants was a direct, necessary, and substantial participant in 

the conspiracy, common enterprise, and/or common course of conduct complained of herein. 

52. Each of the Individual Defendants aided and abetted and rendered substantial 

assistance in the wrongs complained of herein. In taking such actions to substantially assist the 

commission of the wrongdoing complained of herein, each Individual Defendant acted with 

knowledge of the primary wrongdoing, substantially assisted in the accomplishment of that 

wrongdoing, and was aware of his or her overall contribution to and furtherance of the 

wrongdoing. 

IMPROPER FINANCIAL STATEMENTS 

53. According to its public filings, PayPal operates as a technology platform 

company that enables digital and mobile payments on behalf of consumers and merchants 

worldwide. It enables businesses of various sizes to accept payments from merchant websites, 

mobile devices, and applications, as well as at offline retail locations through a range of payment 

solutions. The Company's platform allows customers to pay and get paid, transfer and withdraw 

funds to their bank accounts, and hold balances in their PayPal accounts in various currencies. 

54. Between 2002 and 2015, PayPal operated as a subsidiary of eBay, a 

multinational ecommerce company providing consumer-to-consumer and business-to-consumer 

payment solutions via the internet. 

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55. On December 19, 2013, while PayPal was stilled owned by eBay, eBay 

announced that it would acquire Braintree for $800 million. Braintree was best known for its 

mobile payment application, Venmo, which provided for peer to peer payments. eBay 

announced that Braintree would operate as a separate service within PayPal. In particular, eBay 

stated: 

eBay Inc. (NASDAQ: EBAY) today announced it completed its previously 

announced acquisition of Braintree, the innovative global payment platform 

powering the next generation of leading online and mobile-first startups. In 

accordance with the terms of the acquisition agreement announced September 26, 

2013, eBay acquired Braintree for total consideration of approximately $800 

million in cash. 

Braintree will now operate as a separate service within PayPal under the 

leadership of Braintree CEO Bill Ready, who will report to PayPal President 

David Marcus and has joined PayPal's executive staff. 

Braintree has become the payment platform of choice for next-generation 

innovators like Airbnb, OpenTable, HotelTonight and Uber, transforming 

consumer experiences through mobile devices. PayPal plans to integrate with 

Braintree only in ways that will benefit customers and support Braintree's growth. 

Venmo, Braintree's mobile application that gives people an easy way to pay each 

other using their mobile devices and leveraging social networks, is part of the 

acquisition and will remain a separate app. 

56. As a company that enables the transfer of money between individuals, PayPal and 

Venmo are subject to significant laws and government regulations in the United States and 

around the world. In the United States, as admitted by the Company's Annual Reports on Forms 

10-K filed with the SEC, much of PayPal's business falls under the purview of the Consumer 

Financial Protection Board ("CFPB"), which promulgates regulations that the Company must 

comply with. The Company is also subject to anti-money laundering laws as well as laws that 

are meant to prevent terrorists from using PayPal's services to facilitate illegal activity. PayPal 

must also comply with the Gramm-Leach-Bliley Act, which requires the maintenance of a 

written, comprehensive information security program, and state laws that require the protection 

of sensitive personal customer information. Finally, the Company must not engage in any unfair 

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or deceptive trade practices, as doing so would violate numerous state laws and the Federal 

Trade Commission Act. 

57. In light of myriad regulations imposed on PayPal, investors pay close attention to 

the Company's comments about its compliance with laws and regulations and whether any 

governmental agencies are investigating it. Recognizing this fact, during the years that eBay 

owned PayPal, eBay would inform the public about the laws and regulations which apply to 

PayPal. After the acquisition of Braintree, eBay would also include information concerning the 

application of these laws to Venmo. Unfortunately, unbeknownst to the public, Venmo was 

violating these very same laws that certain of the Individual Defendants were discussing in the 

SEC filings of eBay (and later PayPal) by engaging in unfair and deceptive trade practices. 

58. Because Venmo's business was inflated by its violations of state and federal 

competition law, the financial results of eBay and later PayPal were also inflated. In particular, 

on January 31, 2014, eBay filed an Annual Report on Form 10-K with the SEC, announcing the 

Company's financial and operating results for the quarter and year ended December 31, 2013, 

which was signed by defendants Donahoe, Omidyar, and Moffett. For the quarter, eBay reported 

net income of $850 million on revenue of $4.5 billion. For 2013, eBay reported net income of 

$2.8 billion on revenue of $16 billion. These amounts were inflated due to Venmo's illegal 

business practices. 

59. Notably, defendants Donahoe, Omidyar, and Moffett acknowledged in the Form 

10-K that violating the law could cause PayPal and Venmo significant harm, stating "If PayPal 

or Venmo were found to be in violation of money services laws or regulations, PayPal or Venmo 

could be subject to liability and/or additional restrictions, forced to cease doing business with 

residents of certain states, forced to change its business practices, or required to obtain additional 

licenses or regulatory approvals that could impose a substantial cost on PayPal or Venmo." The 

filing discussed the laws and regulations that applied to PayPal and Venmo in additional detail, 

stating: 

To date, PayPal has obtained licenses to operate as a money transmitter (or its 

equivalent), in 47 U.S. states, the District of Columbia, Puerto Rico and the U.S. 

Virgin Islands. PayPal is also licensed as an escrow agent in one U.S. state. The 

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two remaining U.S. states where PayPal has not applied for a license do not 

currently regulate money transmitters. Braintree's subsidiary Venmo provides its 

peer-to-peer payment service as an agent of an unaffiliated money transmitter, 

PreCash, but Venmo is also licensed as a money transmitter in California, has 

applied for a license in Hawaii, and may need to obtain additional state licenses. 

As licensed money transmitters, PayPal and Venmo are subject to restrictions on 

its investment of customer funds, reporting requirements, bonding requirements, 

and inspection by state regulatory agencies. If PayPal or Venmo were found to 

be in violation of money services laws or regulations, PayPal or Venmo could 

be subject to liability and/or additional restrictions, forced to cease doing 

business with residents of certain states, forced to change its business practices, 

or required to obtain additional licenses or regulatory approvals that could 

impose a substantial cost on PayPal or Venmo. Any change to PayPal's business 

practices that makes the service less attractive to customers or prohibits its use by 

residents of a particular jurisdiction could also decrease the velocity of trade on 

eBay and websites operated by Enterprise clients that accept Pay Pal as a form of 

payment, which would further harm our business. 

60. eBay reiterated this same discussion in its Quarterly Report on Form 10-Q for the 

quarter ending March 31, 2014, filed with the SEC on May 1, 2014. eBay also added a 

discussion about the CFPB and its effect on PayPal and Venmo. In particular, eBay noted that 

the CFPB launched a complaints portal, which allows customers to make complaints directly to 

the CFPB online. In addition, eBay reported a net loss of $2.3 billion on revenue of $4.2 billion. 

In particular, the Form 10-Q stated: 

To date, PayPal has obtained licenses to operate as a money transmitter (or its 

equivalent), in 47 U.S. states, the District of Columbia, Puerto Rico and the U.S. 

Virgin Islands. PayPal is also licensed as an escrow agent in one U.S. state. The 

two remaining U.S. states where PayPal has not applied for a license do not 

currently regulate money transmitters. PayPal's subsidiary Venmo, which was 

acquired as part of the Braintree acquisition, provides its peer-to-peer payment 

service as an agent of an unaffiliated money transmitter, PreCash. Venmo is also 

licensed as a money transmitter in California and Washington, has applied for a 

license in Hawaii and may need to obtain additional state licenses. As licensed 

money transmitters, PayPal and Venmo are subject to restrictions on their 

investment of customer funds, reporting requirements, bonding requirements and 

inspection by state regulatory agencies. If PayPal or Venmo were found to be in 

violation of money services laws or regulations, PayPal or Venmo could be 

subject to liability and/or additional restrictions, forced to cease doing business 

with residents of certain states, forced to change its business practices or 

required to obtain additional licenses or regulatory approvals that could impose 

a substantial cost on PayPal or Venmo. Any change to PayPal's business 

practices that makes the service less attractive to customers or prohibits its use by 

residents of a particular jurisdiction could also decrease the velocity of trade on 

eBay and websites operated by Enterprise clients that accept PayPal as a form of 

payment, which would further harm our business. 

* * * 

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Following the global financial crisis, U.S. federal lawmakers enacted the DoddFrank Act overhauling the federal government's oversight of consumer financial 

products and systemic risk in the U.S. financial system. Although the full effect of 

the new legislation will be dependent on regulations to be adopted by a number of 

different agencies (including the Consumer Financial Protection Bureau), the 

general effect of the financial reform law has been, and we expect will continue to 

be, to require PayPal and Bill Me Later to make additional disclosures to their 

users and to impose new restrictions on certain of their activities. For example, in 

January 2012, the Consumer Financial Protection Bureau finalized new 

regulations, required by the Dodd-Frank Act that required PayPal, starting in late 

October 2013, to provide additional disclosures, error resolution rights and 

cancellation rights to U.S. consumers who make international remittance 

payments, which could increase our costs of processing international payments. 

The Consumer Financial Protection Bureau also launched a complaints portal 

on its website that allows customers to file complaints against PayPal, Venmo 

and other money transfer service providers, and publishes information on such 

complaints. These and other new obligations will impose new compliance 

requirements and obligations on us that could increase our costs, may result in 

increased litigation and the need to make expensive product changes and may 

otherwise adversely impact our business. 

61. On July 18, 2014, eBay filed a Quarterly Report on Form 10-Q for the quarter 

ended June 30, 2014, with the SEC. The Form 10-Q again reiterated the discussion of the laws, 

agencies, and regulations that apply to PayPal and Venmo. For the quarter, eBay reported net 

income of $676 million. In particular, the Form 10-Q stated: 

To date, PayPal has obtained licenses to operate as a money transmitter (or its 

equivalent), in 47 U.S. states, the District of Columbia, Puerto Rico and the U.S. 

Virgin Islands. PayPal is also licensed as an escrow agent in one U.S. state. The 

two remaining U.S. states where PayPal has not applied for a license do not 

currently regulate money transmitters. PayPal's subsidiary Venmo, which was 

acquired as part of the Braintree acquisition, provides its peer-to-peer payment 

service as an agent of an unaffiliated money transmitter, PreCash. Venmo is also 

licensed as a money transmitter in California and Washington, has applied for a 

license in Hawaii and may need to obtain additional state licenses. As licensed 

money transmitters, PayPal and Venmo are subject to restrictions on their 

investment of customer funds, reporting requirements, bonding requirements and 

inspection by state regulatory agencies. If PayPal or Venmo were found to be in 

violation of money services laws or regulations, PayPal or Venmo could be 

subject to liability and/or additional restrictions, forced to cease doing business 

with residents of certain states, forced to change its business practices or 

required to obtain additional licenses or regulatory approvals that could impose 

a substantial cost on PayPal or Venmo. Any change to PayPal's business 

practices that makes the service less attractive to customers or prohibits its use by 

residents of a particular jurisdiction could also decrease the velocity of trade on 

eBay and websites operated by Enterprise clients that accept PayPal as a form of 

payment, which would further harm our business. 

* * * 

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Following the global financial crisis, U.S. federal lawmakers enacted the DoddFrank Act overhauling the federal government's oversight of consumer financial 

products and systemic risk in the U.S. financial system. Although the full effect of 

the new legislation will be dependent on regulations to be adopted by a number of 

different agencies (including the Consumer Financial Protection Bureau), the 

general effect of the financial reform law has been, and we expect will continue to 

be, to require Pay Pal and Bill Me Later to make additional disclosures to their 

users and to impose new restrictions on certain of their activities. For example, in 

January 2012, the Consumer Financial Protection Bureau finalized new 

regulations, required by the Dodd-Frank Act that required PayPal, starting in late 

October 2013, to provide additional disclosures, error resolution rights and 

cancellation rights to U.S. consumers who make international remittance 

payments, which could increase our costs of processing international payments. 

The Consumer Financial Protection Bureau also launched a complaints portal 

on its website that allows customers to file complaints against PayPal, Venmo 

and other money transfer service providers, and publishes information on such 

complaints. These and other new obligations will impose new compliance 

requirements and obligations on us that could increase our costs, may result in 

otherwise adversely impact our business. 

62. On October 16, 2014, eBay filed a Quarterly Report on Form 10-Q for the quarter 

ended September 30, 2014, with the SEC. The Form 10-Q recognized the increased scrutiny the 

CFPB placed on money transfer services, like PayPal and Venmo, and that the agency was 

implementing new regulations on PayPal and Venmo. In addition, for the quarter, eBay reported 

net income of $673 million on revenue of $4.3 billion. In the Form 10-Q, it again discussed the 

varied laws in which PayPal and Venmo were subject to and the harm that would befall the 

Company if they were found to have violated them. The Form 10-Q stated: 

To date, PayPal has obtained licenses to operate as a money transmitter (or its 

equivalent), in 47 U.S. states, the District of Columbia, Puerto Rico and the U.S. 

Virgin Islands. PayPal is also licensed as an escrow agent in one U.S. state. The 

two remaining U.S. states where PayPal has not applied for a license do not 

currently regulate money transmitters. PayPal's subsidiary Venmo, which was 

acquired as part of the Braintree acquisition, provides its peer-to-peer payment 

service as an agent of PayPal, Inc. Venmo is also licensed as a money transmitter 

in California, Vermont and Washington and has applied for a license in Hawaii 

and may need to obtain additional state licenses. As licensed money transmitters, 

PayPal and Venmo are subject to restrictions on their investment of customer 

funds, reporting requirements, bonding requirements and inspection by state 

regulatory agencies. If PayPal or Venmo were found to be in violation of money 

services laws or regulations, PayPal or Venmo could be subject to liability 

and/or additional restrictions, forced to cease doing business with residents of 

certain states, forced to change its business practices or required to obtain 

additional licenses or regulatory approvals that could impose a substantial cost 

on PayPal or Venmo. Any change to PayPal's business practices that makes the 

service less attractive to customers or prohibits its use by residents of a particular 

jurisdiction could also decrease the velocity of trade on eBay and websites 

operated by Enterprise clients that accept PayPal as a form of payment, which 

would further harm our business. 

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* * * 

Following the global financial crisis, U.S. federal lawmakers enacted the DoddFrank Act overhauling the federal government's oversight of consumer financial 

products and systemic risk in the U.S. financial system. Although the full effect of 

the new legislation will be dependent on regulations to be adopted by a number of 

different agencies (including the Consumer Financial Protection Bureau, or 

CFPB), the general effect of the financial reform law has been, and we expect will 

continue to be, to require PayPal and PayPal Credit to make additional disclosures 

to their users and to impose new restrictions on certain of their activities. For 

example, in January 2012, the CFPB finalized new regulations, required by the 

Dodd-Frank Act that required PayPal, starting in Late October 2013, to provide 

additional disclosures, error resolution rights and cancellation rights to U.S. 

consumers who make international remittance payments, which could increase 

our costs of processing international payments. The CFPB also launched a 

complaints portal on its website that allows customers to file complaints against 

PayPal, Venmo and other money transfer service providers, and publishes 

information on such complaints. These and other new obligations will impose 

new compliance requirements and obligations on us that could increase our costs, 

may result in increased litigation and the need to make expensive product changes 

and may otherwise adversely impact our business. 

63. On February 6, 2015, eBay filed an Annual Report on Form 10-K for the quarter 

and year ended December 31, 2014, with the SEC. The Form 10-K was signed by defendants 

Donahoe, Omidyar, Dorman, Moffett and Yeary. For the quarter, eBay reported net income of 

$1 billion on revenue of $4.9 billion. For 2014, eBay reported net income of $46 million on 

revenue of $17.9 billion. These results were inflated due to Venmo's illegal business practices. 

In addition, the Form 10-K again discussed the laws and regulations in which PayPal and Venmo 

are subject, stating: 

PayPal has obtained licenses to operate as a money transmitter (or its equivalent) 

in the United States, in the states where it is required, and the District of 

Columbia, the U.S. Virgin Islands and Puerto Rico. PayPal's subsidiary, Venmo, 

is also licensed as a money transmitter in certain U.S. states. As licensed money 

transmitters, PayPal and Venmo are subject to restrictions on their investment of 

customer funds, reporting requirements, bonding requirements and inspection by 

state regulatory agencies. Accordingly, PayPal and Venmo could be subject to 

liability and/or additional restrictions, forced to cease doing business with 

residents of certain states, forced to change their business practices or be required 

to obtain additional licenses or regulatory approvals that could impose substantial 

cost if they violate these laws or regulations. 

64. On April 23, 2015, eBay filed a Quarterly Report on Form 10-Q for the quarter 

ended March 31, 2015, with the SEC. For the quarter, eBay reported net income of $626 million 

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on revenue of $4.4 billion. The Form 10-Q reiterated the discussion of the laws and regulations 

applicable to PayPal and Venmo, stating: 

PayPal has obtained licenses to operate as a money transmitter (or its equivalent) 

in the United States, in the states where it is required, and the District of 

Columbia, the U.S. Virgin Islands and Puerto Rico. PayPal's subsidiary, Venmo, 

is also licensed as a money transmitter in certain U.S. states. As licensed money 

transmitters, PayPal and Venmo are subject to restrictions on their investment of 

customer funds, reporting requirements, bonding requirements and inspection by 

state regulatory agencies. Accordingly, PayPal and Venmo could be subject to 

liability and/or additional restrictions, forced to cease doing business with 

residents of certain states, forced to change their business practices or be required 

to obtain additional licenses or regulatory approvals that could impose substantial 

cost if they violate these laws or regulations. 

65. On July 17, 2015, eBay spun off its PayPal units to Plaintiffs and eBay's other 

stockholders. As part of the spinoff, eBay's stockholders received one share of PayPal stock for 

each share of eBay stock that they owned. PayPal's stock began trading on the NASDAQ on 

July 20, 2015. 

66. Despite PayPal becoming a separately traded company, the Individual Defendants 

continued to make improper statements in the Company's filings. In particular, PayPal continued 

to report inflated numbers based on Venmo's illegal business practices, while at the same time 

acknowledging that the Company's business is subject to significant regulatory scrutiny. 

67. PayPal's first quarterly statement as a standalone company occurred on July 29, 

2015. On that date, PayPal filed its Quarterly Report on Form 10-Q for the quarter ended June 

30, 2015, with the SEC. For the quarter, the Company reported net income of $305 million on 

revenue of $2.2billion. Concerning the laws and regulations which the Company is subject to 

(and impliedly complying with), the Form 10-Q stated: 

PayPal, Inc. has obtained licenses to operate as a money transmitter (or its 

equivalent) in the United States, in the states where it is required, and the District 

of Columbia, the U.S. Virgin Islands and Puerto Rico. Our subsidiary, Venmo, is 

also licensed as a money transmitter in certain U.S. states. As licensed money 

transmitters, PayPal and Venmo are subject to restrictions with respect to their 

investment of customer funds, reporting requirements, bonding requirements and 

inspection by state regulatory agencies. Accordingly, we could be subject to 

liability and/or additional restrictions, forced to cease doing business with 

residents of certain states, forced to change our business practices or be required 

to obtain additional licenses or regulatory approvals that could impose substantial 

cost if we violate these laws or regulations. 

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68. The Form 10-Q contained signed certifications pursuant to the Sarbanes-Oxley 

Act of 2002 ("SOX Certifications") by defendants Schulman and Dupuis, which stated: 

I, [Daniel H. Schulman/Patrick L.A. Dupuis], certify that: 

1. I have reviewed this report on Form 10-Q of PayPal Holdings, Inc.; 

2. Based on my knowledge, this report does not contain any untrue statement of 

a material fact or omit to state a material fact necessary to make the statements 

made, in light of the circumstances under which such statements were made, 

not misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial 

information included in this report, fairly present in all material respects the 

financial condition, results of operations and cash flows of the registrant as of, 

and for, the periods presented in this report; 

4. The registrant's other certifying officer(s) and I are responsible for 

establishing and maintaining disclosure controls and procedures (as defined in 

Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over 

financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d15(f)) for the registrant and have: 

a) Designed such disclosure controls and procedures, or caused such 

disclosure controls and procedures to be designed under our supervision, 

to ensure that material information relating to the registrant, including its 

consolidated subsidiaries, is made known to us by others within those 

entities, particularly during the period in which this report is being 

prepared; 

b) Designed such internal control over financial reporting, or caused such 

internal control over financial reporting to be designed under our 

supervision, to provide reasonable assurance regarding the reliability of 

financial reporting and the preparation of financial statements for external 

purposes in accordance with generally accepted accounting principles; 

c) Evaluated the effectiveness of the registrant's disclosure controls and 

procedures and presented in this report our conclusions about the 

effectiveness of the disclosure controls and procedures, as of the end of 

the period covered by this report based on such evaluation; and 

d) Disclosed in this report any change in the registrant's internal control over 

financial reporting that occurred during the registrant's most recent fiscal 

quarter (the registrant's fourth fiscal quarter in the case of an annual 

report) that has materially affected, or is reasonably likely to materially 

affect, the registrant's internal control over financial reporting; and 

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5. The registrant's other certifying officer(s) and I have disclosed, based on our 

most recent evaluation of internal control over financial reporting, to the 

registrant's auditors and the audit committee of the registrant's board of 

directors (or persons performing the equivalent functions): 

a) All significant deficiencies and material weaknesses in the design or 

operation of internal control over financial reporting which are reasonably 

likely to adversely affect the registrant's ability to record, process, 

summarize and report financial information; and 

b) Any fraud, whether or not material, that involves management or other 

employees who have a significant role in the registrant's internal control 

over financial reporting. 

* * * 

I, [Daniel H. Schulman/Patrick L.A. Dupuis], hereby certify pursuant to 18 U.S.C. 

Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

that: 

(i) The accompanying quarterly report on Form 10-Q for the quarter ended June 

30, 2015 fully complies with the requirements of Section 13(a) or Section 

15(d) of the Securities Exchange Act of 1934, as amended; and 

(ii) The information contained in such report fairly presents, in all material 

respects, the financial condition and results of operations of PayPal Holdings, 

Inc. 

69. On October 29, 2015, PayPal filed its Quarterly Report on Form 10-Q for the 

quarter ended September 30, 2015, with the SEC. PayPal reported net income of $301 million 

on revenue of $2.2 billion. The Form 10-Q acknowledged that violations of regulations and laws 

applying to Venmo and PayPal could significantly disrupt and damage the Company. In 

particular, the Form 10-Q stated: 

In the United States, PayPal, Inc. has obtained licenses to operate as a money 

transmitter (or its equivalent) in the states where it is required, as well as in the 

District of Columbia, the U.S. Virgin Islands and Puerto Rico. Our subsidiary, 

Venmo, is also licensed as a money transmitter in certain U.S. states, and acts as 

an authorized delegate and agent of PayPal in the states where Venmo is not 

directly licensed. As licensed money transmitters PayPal and Venmo are subject 

to restrictions with respect to their investment of customer funds, reporting 

requirements, bonding requirements and inspection by state regulatory agencies. 

Accordingly, if we violate these laws or regulations, we could be subject to 

liability and/or additional restrictions, forced to cease doing business with 

residents of certain states, forced to change our business practices or be required 

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to obtain additional licenses or regulatory approvals that could impose substantial 

costs. 

70. The Form 10-Q contained signed SOX Certifications by defendants Schulman and 

Rainey, which were substantially similar to those set forth above. 

71. On February 11, 2016, PayPal filed its Annual Report on Form 10-K for the 

quarter and year ended December 31, 2015, with the SEC. The Form 10-K was signed by 

defendants Schulman, Rainey, Casares, Christodoro, Donahoe, Dorman, McGovern, Moffett, 

Omidyar and Yeary. PayPal reported net income of $367 million on revenue of $2.5 billion for 

the quarter. For 2015, PayPal reported net income of $1.2 billion on revenue of $9.2 billion. 

The Form 10-K contained similar disclosures concerning the laws and regulations applicable to 

PayPal and its subsidiaries as the Company's other filings. In particular, the Form 10-K stated: 

In the United States, PayPal, Inc. has obtained licenses to operate as a money 

transmitter (or its equivalent) in the states where it is required, as well as in the 

District of Columbia, the U.S. Virgin Islands and Puerto Rico. This license 

includes not only the PayPal branded products and services in these states, but 

also our Venmo branded products and services. Our subsidiary, Xoom, is also 

licensed as a money transmitter in certain U.S. states. As licensed money 

transmitters, PayPal and Xoom are subject to restrictions with respect to their 

investment of customer funds, reporting requirements, bonding requirements and 

inspection by state regulatory agencies. Accordingly, if we violate these laws or 

regulations, we could be subject to liability and/or additional restrictions, forced 

to cease doing business with residents of certain states, forced to change our 

business practices or be required to obtain additional licenses or regulatory 

approvals that could impose substantial costs. 

72. The Form 10-K contained SOX Certifications signed by defendants Schulman and 

Rainey, which were substantially similar to those set forth above. 

73. The Individual Defendants' statements above were improper. The statements 

failed to disclose material adverse facts about the Company's business and compliance with the 

law concerning Venmo's illegal business practices, which in turn inflated the above specified 

financial results. 

THE MISLEADING PROXY

74. On April 14, 2016, defendants Casares, Christodoro, Donahoe, Dorman, 

McGovern, Moffett, Omidyar, Schulman and Yeary issued to stockholders a Proxy Statement on 

Form DEF 14A (the "Proxy") that contained materially misleading statements. Plaintiffs' 

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allegations with respect to the misleading statements in the Proxy are based solely on negligence; 

they are not based on any allegation of reckless or knowing conduct by or on behalf of these 

defendants, and they do not allege and do not sound in fraud. Plaintiff specifically disclaims any 

allegations of, reliance upon any allegation of, or reference to any allegation of fraud, scienter, or 

recklessness with regard to these allegations and related claim. 

75. In the Proxy, defendants Casares, Christodoro, Donahoe, Dorman, McGovern, 

Moffett, Omidyar, Schulman and Yeary solicited stockholder votes to reelect themselves to the 

Board. In support of their bid for reelection, defendants Casares, Christodoro, Donahoe, 

Dorman, McGovern, Moffett, Omidyar, Schulman and Yeary highlighted their supposed 

successful oversight of the Company. In particular, the Proxy described their responsibilities, the 

duties of each committee, their active role in risk management, and touted PayPal and the 

Board's "strong governance standards" in multiple places in the Proxy. In addition, defendants 

Casares, Christodoro, Donahoe, Dorman, McGovern, Moffett, Omidyar, Schulman and Yeary 

claimed that "the Board is committed to good corporate governance." 

76. Defendants Casares, Christodoro, Donahoe, Dorman, McGovern, Moffett, 

Omidyar, Schulman and Yeary's statements in the Proxy were incorrect. The Board was not 

committed to strong or even good corporate governance. Rather, Venmo was engaging in unfair 

trade practices. In fact, the Company had already received a civil investigative demand from the 

SEC about Venmo's deceptive practices before making the misleading statements in the Proxy. 

Thus, defendants Casares, Christodoro, Donahoe, Dorman, McGovern, Moffett, Omidyar, 

Schulman and Yeary should have been aware of the deficiencies in their corporate governance at 

the time of the Proxy. 

77. In addition, throughout the Proxy, defendants Casares, Christodoro, Donahoe, 

Dorman, McGovern, Moffett, Omidyar, Schulman and Yeary routinely used the Company's 

supposed "regulatory achievements" as a performance factor in justifying executive 

compensation. For instance, in justifying the executive compensation awarded to the Company's 

Chief Legal Officer, A. Louise Pentland, the Proxy specifically cited the following factors: 

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(1) Lead compliance with financial and regulatory requirements; (2) Lead corporate governance 

initiatives to reflect best practices; and (3) Provide effective legal support related to acquisitions 

and integration. 

78. Further, the Proxy additionally touted the Audit Committee's supposed 

achievements over the prior year, which included the following: 

 Inquired about significant business, regulatory, and financial reporting risks, 

reviewed PayPal's policies for risk assessment and risk management, and assessed 

the steps management is taking to control these risks; 

 Reviewed the Company's compliance management system to increase its 

oversight in this area; and

 Reviewed with the Chief Legal Officer matters that may have a material impact 

on the combined and consolidated financial statements or internal control over 

financial reporting and the effectiveness of the Company's compliance program, 

and regularly received status reports of compliance issues.

79. Thus, because defendants Casares, Christodoro, Donahoe, Dorman, McGovern, 

Moffett, Omidyar, Schulman and Yeary affirmatively put the Company's "regulatory 

compliance" at issue in multiple places, they were necessarily required to disclose the Company's 

regulatory problems (i.e., the FTC's investigation and receipt of the CID). 

80. The statements about the Board governance practices were the essential link to 

stockholders reelecting defendants Casares, Christodoro, Donahoe, Dorman, McGovern, Moffett, 

Omidyar, Schulman and Yeary to the Board and in approving the executive compensation 

awarded. Indeed, the multiple mentions of the Company and Board's supposed "strong 

governance standards" and "regulatory compliance" demonstrates that the defendants themselves 

thought these statements were material to stockholders. 

THE TRUTH BEGINS TO EMERGE 

81. The truth behind the Company's business prospects and Individual Defendants' 

wrongdoing began to emerge on April 28, 2016, when PayPal filed its Quarterly Report on Form 

10-Q for the quarter ended March 31, 2016. In the filing, PayPal disclosed that it received a CID 

from the FTC. The CID revealed that the FTC was investigating whether Venmo engaged in 

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deceptive or unfair practices in violation of the Federal Trade Commission Act. In particular, the 

Form 10-Q stated: 

On March 28, 2016, we received a [CID] from the [FTC] as part of its 

investigation to determine whether we, through our Venmo service, have been or 

are engaged in deceptive or unfair practices in violation of the Federal Trade 

Commission Act. The CID requests the production of documents and answers to 

written questions related to our Venmo service. We are cooperating with the FTC 

in connection with the CID. The CID could lead to an enforcement action and/or 

one or more consent orders, which may result in substantial costs, including legal 

fees, fines, penalties, and remediation expenses and actions, and could require us 

to change aspects of the manner in which we operate Venmo. 

82. On this news, the Company's market capitalization fell over $1 billion. 

83. A month later, on May 20, 2016, Texas Attorney General, Ken Paxton, 

announced a settlement with PayPal over Venmo's business practices. In particular, the Texas 

Attorney General explained that, among other things, Venmo misrepresented information to 

customers and used customers' phone contacts without adequate explanation, in violation of 

Texas law. A statement from the Attorney General's office stated: 

The Texas Attorney General's Consumer Protection Division conducted an 

investigation for potential violations of the Texas Deceptive Trade Practices Act 

(DTPA) and found a number of issues regarding the safety and security of the 

Venmo app. According to investigators, Venmo used consumers' phone contacts 

without clearly disclosing how the contacts would be used, did not clearly 

disclose how consumers' transactions and interactions with other users would be 

shared, and misrepresented that communications from Venmo were actually from 

particular Venmo users. As a result, consumers may have publically exposed 

private information regarding their payments. In January 2016 alone, Venmo 

processed $1 billion in transactions. 

As part of its settlement, PayPal agrees that its Venmo app will improve 

disclosures to consumers regarding privacy and security. Paypal also agrees to 

better inform users of the safeguards available on its app, and ensure consumers 

understand who will be able to view their transaction information. The settlement 

also includes a payment of $175,000 to the State of Texas. 

84. On the news of PayPal's settlement with Texas over Venmo's apparent illegal 

business practices, the Company's market capitalization fell another $145 million. 

85. The Company continues to be extremely vague about the FTC investigation. 

However, it has admitted in its most recent Annual Report on Form 10-K, filed with the SEC on 

February 7, 2018, that the FTC's investigation is continuing. 

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INSIDER SALES BY DEFENDANT DONAHOE 

86. Rather than providing the market with correct information, defendant Donahoe 

used his knowledge of PayPal's material, nonpublic information to sell his personal holdings 

while the Company's stock was artificially inflated. As officers and directors of PayPal, 

defendant Donahoe was privy to material, nonpublic information about the Company's true 

business health. 

87. While in possession of this knowledge, defendant Donahoe sold over 1.8 million 

shares of his personally held PayPal stock for proceeds of over $70 million. His sales were 

timed to maximize profit from PayPal's then artificially inflated stock price. 

88. Defendant Donahoe's sales are particularly suspicious given that his stock sales 

represented over 93% of his holdings as demonstrated by the table below: 

Insider Name: DONAHOE (PayPal) 

 

Shares Sold During SP 1,830,584 

Shares Remaining After Sales 128,749 

Total Shares Before Sales 1,959,333 

Total Proceeds from Sales $70,273,773.04 

% of Total Ownership Sold During 

SP 93.43% 

89. In sum, defendant Donahoe sold over $70 million worth of stock at artificially 

inflated prices as detailed by the table below: 

Insider Last 

Name 

Transaction 

Date Shares Price Proceeds 

DONAHOE 7/27/2015 5,895 $36.85 $217,230.75

 7/27/2015 369,948 $36.71 $13,580,791.08

 7/27/2015 4,700 $37.29 $175,263.00

 7/31/2015 764,453 $38.59 $29,500,241.27

 8/5/2015 507,251 $39.45 $20,011,609.93

 8/10/2015 65,486 $39.19 $2,566,717.22

 8/10/2015 37,975 $39.19 $1,488,395.95

 11/5/2015 21,486 $37.14 $797,992.19

 11/20/2015 53,390 $36.25 $1,935,531.65

 1,830,584 $70,273,773.04

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DAMAGES TO PAYPAL 

90. As a result of the Individual Defendants' improprieties, PayPal disseminated 

improper, public statements concerning the Company's legal compliance and earnings results. 

These improper statements have devastated PayPal's credibility as reflected by the Company's 

almost $16 billion, or nearly 30%, market capitalization loss. 

91. PayPal's performance issues also damaged its reputation within the business 

community and in the capital markets. PayPal's ability to raise equity capital or debt on 

favorable terms in the future is now impaired. In addition, the Company stands to incur higher 

marginal costs of capital and debt because the improper statements and misleading projections 

disseminated by the Individual Defendants have materially increased the perceived risks of 

investing in and lending money to the Company. 

92. Further, Venmo's credibility with customers is severely affected, as they now 

believe the Company used its improper business practices to take advantage of them. The 

Company also faces a potential consumer class action on behalf of those customers that used 

Venmo that were taken advantage of.

93. Also, defendant Donahoe utilized the Company's material, nonpublic information 

to benefit himself by selling his personally held stock at prices that he knew were inflated. 

94. Further, as a direct and proximate result of the Individual Defendants' actions, 

PayPal has expended, and will continue to expend, significant sums of money. Such 

expenditures include, but are not limited to: 

(a) costs incurred from responding to the CID; 

(b) costs incurred from defendants and settling any state or federal actions 

over Venmo's illegal business practices, including the Texas state action; 

and 

(c) costs incurred from compensation and benefits paid to the defendants who 

have breached their duties to PayPal. 

DERIVATIVE ALLEGATIONS 

95. Plaintiffs incorporate the above paragraphs as if fully set forth herein. 

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96. Pursuant to Del. Ch. Ct. R. 23.1, Plaintiffs bring this action derivatively on 

behalf of PayPal to redress injuries suffered, and yet to be suffered, by the Company as a 

proximate result of Defendants' violations of securities laws, breaches of fiduciary duty, waste of 

corporate assets, and unjust enrichment. 

97. The PayPal Board has eleven members. They are defendants Casares, 

Christodoro, Donahoe, Dorman, McGovern, Moffett, Schulman and Yeary, and non-defendants 

Rodney C. Adkins, Belinda Johnson and Ann M. Sarnoff. 

98. On July 31, 2017, Plaintiffs designated the complaint filed by plaintiff Liss on 

April 28, 2017, as the operative complaint in this action. PayPal subsequently moved to dismiss 

that complaint on the grounds that Plaintiffs had not made a demand upon the PayPal Board. On 

January 18, 2018, the Court dismissed the complaint for failure to make a demand on the PayPal 

Board, with leave to amend. 

99. On February 15, 2018, to cure this perceived pleading defect, Plaintiffs served 

the Demand upon the PayPal Board, and thereafter forwarded the Demand to its counsel in this 

action. See Exhibit A hereto. The Demand in general demands that PayPal investigate and bring 

appropriate legal action against the Individual Defendants named herein related to the facts 

alleged herein. 

100. PayPal has not yet had an opportunity to respond to the Demand. The 

proceedings in this action should be temporarily stayed to enable PayPal time to do so. 

COUNT I 

Against the Director Defendants for Violations of 

Section 14(a) of the Exchange Act and SEC Rule 14a-9 Promulgated Thereunder 

101. Plaintiffs incorporate by reference and reallege each and every allegation 

contained above, as though fully set forth herein, except for any allegation based on fraud, 

scienter, or recklessness. 

102. The Director Defendants disseminated the false and misleading Proxy specified 

above, which failed to disclose material facts necessary in order to make the statements made, in 

light of the circumstances under which they were made, not misleading. 

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103. The Proxy was prepared, reviewed, and/or disseminated by the Director 

Defendants. It misrepresented and/or omitted material facts, including material information 

about the Company's business prospects and falsely touted the Board's "strong governance 

standards." 

104. In addition, throughout the Proxy, the Director Defendants routinely used the 

Company's supposed "regulatory achievements" as a performance factor in justifying executive 

compensation. Further, the Proxy touted the supposed achievements of the Audit Committee, 

which purported included, inter alia, reviewing "the Company's compliance management system 

to increase its oversight in this area." 

105. In so doing, the Director Defendants made untrue statements of material facts and 

omitted to state material facts necessary to make the statements that were made not misleading in 

violation of section 14(a) of the Exchange Act and SEC Rule 14a-9 promulgated thereunder. 

106. The Director Defendants were negligent in filing the Proxy with these materially 

false and misleading statements. 

107. The omissions and false and misleading statements in the Proxy are material in 

that a reasonable stockholder would consider them important in deciding how to vote on whether 

to reelect defendants Casares, Christodoro, Donahoe, Dorman, McGovern, Moffett, Omidyar, 

Schulman and Yeary to the Board and to approve of the Company's executive compensation 

policies. In addition, a reasonable investor would view a full and accurate disclosure as 

significantly altering the "total mix" of information made available in the Proxy and in other 

information reasonably available to stockholders. 

108. By reason of the foregoing, the Director Defendants have violated section 14(a) of 

the Exchange Act and SEC Rule 14a-9(a) promulgated thereunder. 

109. The Company was damaged as a result of the Director Defendants' material 

misrepresentations and omissions in the Proxy as described herein. 

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COUNT II

Against the Individual Defendants for Breach of Fiduciary Duty 

110. Plaintiffs incorporate by reference and reallege each and every allegation 

contained above, as though fully set forth herein. 

111. The Individual Defendants owed and owe PayPal fiduciary obligations. By 

reason of their fiduciary relationships, the Individual Defendants owed and owe PayPal the 

highest obligation of good faith, fair dealing, loyalty, and due care. 

112. The Individual Defendants and each of them, violated and breached their 

fiduciary duties of candor, good faith, and loyalty. More specifically, the Individual Defendants 

violated their duty of good faith by creating a culture of lawlessness within PayPal, and/or 

consciously failing to prevent to Company from engaging in the unlawful acts complained of 

herein. 

113. In addition, defendant Donahoe breached his duty of loyalty by selling his 

personally held PayPal stock on the basis of material, nonpublic information. 

114. As a direct and proximate result of the Individual Defendants' breaches of their 

fiduciary obligations, PayPal has sustained significant damages, as alleged herein. As a result of 

the misconduct alleged herein, these defendants are liable to the Company. 

115. Plaintiff, on behalf of PayPal, has no adequate remedy at law. 

COUNT III 

Against the Individual Defendants for Waste of Corporate Assets 

116. Plaintiffs incorporate by reference and reallege each and every allegation 

contained above, as though fully set forth herein. 

117. As a result of the above, the Individual Defendants have caused PayPal to waste 

its assets by paying improper compensation and bonuses to certain of its executive officers and 

directors that breached their fiduciary duty. 

118. As a result of the waste of corporate assets, the Individual Defendants are liable to 

the Company. 

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119. Plaintiffs, on behalf of PayPal, have no adequate remedy at law. 

COUNT IV 

Against the Individual Defendants for Unjust Enrichment 

120. Plaintiffs incorporate by reference and reallege each and every allegation 

contained above, as though fully set forth herein. 

121. By their wrongful acts and omissions, the Individual Defendants were unjustly 

enriched at the expense of and to the detriment of PayPal. The Individual Defendants were 

unjustly enriched as a result of the compensation and director remuneration they received while 

breaching fiduciary duties owed to PayPal. 

122. Defendant Donahoe sold PayPal stock while in possession of material, nonpublic 

information that artificially inflated the price of PayPal stock. As a result, defendant Donahoe 

profited from his misconduct and was unjustly enriched through his exploitation of material and 

adverse inside information. 

123. Plaintiffs, as stockholders and representatives of PayPal, seek restitution from 

these defendants, and each of them, and seeks an order of this Court disgorging all profits, 

benefits, and other compensation obtained by these defendants, and each of them, from their 

wrongful conduct and fiduciary breaches. 

124. Plaintiffs, on behalf of PayPal, have no adequate remedy at law. 

PRAYER FOR RELIEF 

WHEREFORE, Plaintiffs, on behalf of PayPal, demand judgment as follows: 

A. Temporarily staying this action pending the Board’s response to the Demand; 

B. Declaring that plaintiffs may maintain this action on behalf of PayPal and that 

plaintiffs are adequate representatives of the Company; 

C. Against all of the defendants and in favor of the Company for the amount of 

damages sustained by the Company as a result of the defendants' violation of securities law, 

breaches of fiduciary duties, waste of corporate assets, and unjust enrichment; 

D. Directing PayPal to take all necessary actions to reform and improve its corporate 

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governance and internal procedures to comply with applicable laws and to protect PayPal and its 

stockholders from a repeat of the damaging events described herein, including, but not limited to, 

putting forward for stockholder vote, resolutions for amendments to the Company's By-Laws or 

Articles of Incorporation and taking such other action as may be necessary to place before 

stockholders for a vote of the following Corporate Governance Policies: 

1. a proposal to strengthen the Company's compliance with fair competition 

laws; 

2. a proposal to strengthen the Company's controls over financial reporting; 

3. a provision to prevent insider selling; 

4. a proposal to strengthen the Board's supervision of operations and 

develop and implement procedures for greater stockholder input into the 

policies and guidelines of the Board; 

5. a provision to permit the stockholders of PayPal to nominate at least three 

candidates for election to the Board; and 

6. a proposal to strengthen PayPal's oversight of its disclosure procedures. 

E. Extraordinary equitable and/or injunctive relief as permitted by law, equity, and 

state statutory provisions sued hereunder, including attaching, impounding, imposing a 

constructive trust on, or otherwise restricting the proceeds of defendants' trading activities or 

their other assets so as to assure that plaintiff on behalf of PayPal has an effective remedy; 

F. Awarding to PayPal restitution from defendants, and each of them, and ordering 

disgorgement of all profits, benefits, and other compensation obtained by the defendants, 

including all ill-gotten gains from insider selling by defendants; 

G. Awarding to Plaintiffs the costs and disbursements of the action, including 

reasonable attorneys' fees, accountants' and experts' fees, costs, and expenses; and 

H. Granting such other and further relief as the Court deems just and proper. 

Case 3:17-cv-00162-RS Document 51 Filed 02/16/18 Page 36 of 43
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JURY DEMAND 

Plaintiffs demand a trial by jury. 

Dated: February 16, 2018 ROBBINS ARROYO LLP 

BRIAN J. ROBBINS 

FELIPE J. ARROYO 

SHANE P. SANDERS 

SCOTT F. TEMPLETON 

/s/ Shane P. Sanders

SHANE P. SANDERS

600 B Street, Suite 1900 

San Diego, CA 92101 

Telephone: (619) 525-3990 

Facsimile (619) 525-3991 

E-mail: brobbins@robbinsarroyo.com 

farroyo@robbinsarroyo.com 

ssanders@robbinsarroyo.com 

stempleton@robbinsarroyo.com 

PROMISLOFF & CIARLANTO, P.C. 

JEFFREY J. CIARLANTO 

DAVID M. PROMISLOFF 

5 Great Valley Parkway, Suite 210 

Malvern, PA 19355 

Telephone: (215) 259-5156 

Facsimile: (215) 600-2642 

E-mail: ciarlanto@prolawpa.com 

 david@prolawpa.com 

Co-Lead Counsel for Plaintiffs 

ROBBINS GELLER RUDMAN

 & DOWD LLP 

SHAWN A. WILLIAMS 

Post Montgomery Center 

One Montgomery Street, Suite 1800 

San Francisco, CA 94104 

Telephone: (415) 288-4545 

Facsimile (415) 288-4534 

E-mail: shawnw@rgrdlaw.com 

ROBBINS GELLER RUDMAN 

 & DOWD LLP 

TRAVIS E. DOWNS III 

BENNY C. GOODMAN III 

ERIK W. LUEDEKE 

655 West Broadway, Suite 1900 

San Diego, CA 92101 

Telephone: (619) 231-1058 

Facsimile: (619) 231-7423 

E-mail: travisd@rgrdlaw.com 

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bennyg@rgrdlaw.com 

eluedeke@rgrdlaw.com 

THE BROWN LAW FIRM, P.C. 

TIMOTHY W. BROWN 

240 Townsend Square 

Oyster Bay, NY 11771 

Telephone: (516) 922-5427 

Facsimile: (516) 344-6204 

E-mail: tbrown@thebrownlawfirm.net 

LAW OFFICE OF ALFRED G. 

 YATES, JR., P.C. 

Alfred G. Yates, Jr. 

Gerald L. Rutledge 

300 Mt. Lebanon Boulevard, Suite 206-B 

Pittsburgh, PA 15234 

Telephone: (412) 391-5164 

Facsimile: (412) 471-1033 

E-mail: yateslaw@aol.com 

Additional Counsel for Plaintiffs 

1242831 

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CERTIFICATE OF SERVICE 

I hereby certify that on February 16, 2018, I electronically filed the foregoing with the 

Clerk of the Court using the CM/ECF system which will send notification of such filing to the email addresses on the Notice of Electronic Filing for this action. 

/s/ Shane P. Sanders

SHANE P. SANDERS 

Case 3:17-cv-00162-RS Document 51 Filed 02/16/18 Page 39 of 43

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