[Update: Nyu Media reports the issue has been resolved and all "reserve funds" have been released to the developers. A PayPal representative also contacted Destructoid about the matter, asserting the company does not intend to impede projects, and making strides to avoid similar situations in the future.]
A representative for PayPal sent a statement to Polygon about this issue, stating that interfering with the goals of companies who use their service is not their intention, and that the company is continuing to change their policies to avoid friction in the future.
Yatagarasu Attack on Cataclysm has the potential to be something of a success story for Japanese indie games. Developed by PDW: Hotapen, a triumvirate of former King of Fighters veterans, the work in progress raised more than $118,000 via Indiegogo recently, coming within spitting distance of doubling its original $68,000 goal.
It was a rousing success. However, the project's fate seems to hang in the balance as Paypal is refusing to release funds to the development team. According to publisher Nyu Media, the eBay subsidiary has inexplicably made plans to release up to half the capital prior to the title's launch with the rest coming afterwards.
Nyu Media notes similar occurrences has transpired in the past, markedly with Skullgirls studio Lab Zero Games earlier this year. The publisher is currently pressing their case with PayPal's customer service team. Hopefully, this situation can be rectified before a lack of finances acts as a roadblock to development.
PayPal Refuse to Release Yatagarasu AoC Funding [Indiegogo]