[JCB_K]

offered money back to the sites

That's where the problem lies, they first took money from users, and then "offer" to pay it back. They should've done it the other way around, only charging money for sites which actually signed up to the service.

They've done a good job at making it sound like a great service for publishers, but when you think about it a bit more it's quite shady.

[Groxx]

There's no charging for reading on sites that have signed up. It was a voluntary monthly payment for them to try to distribute evenly to publishers based on your use, not a "use Readability on x.com, pay Readability $1 which we'll transfer to x.com" model. If it were the latter, I'd agree with you, but it's nothing like that.

[freehunter]

As Groxx said, the money was collected, but not on behalf of the sites. The only reason it was offered back to the sites was because of good will. They didn't have to pay them a dime. They could have easily pocketed the $5/mo.