Crowdfunding fraudsters on sites such as GoFundMe, Kickstarter and IndieGogo are now officially in the sights of federal regulators.
The Federal Trade Commission settled its first crowdfunding fraud case involving a man, Erik Chevalier, who collecting $122,000 through Kickstarter meant to fund a board game, The Doom That Came to Atlantic City, he never made. Chevalier instead used the money to live, pay his rent and relocate.
Chevalier promised perks to the 1,246 supporters who contributed to his campaign, including a final copy of the game or “specially designed pewter game figurines,” the FTC said in a news release. Those backers never got the swag.
“Many consumers enjoy the opportunity to take part in the development of a product or service through crowdfunding, and they generally know there’s some uncertainty involved in helping start something new,” FTC director of consumer protection Jessica Rich said in a news release Thursday. “But consumers should able to trust their money will actually be spent on the project they funded.”
The FTC ordered Chevalier to repay the money, but he doesn’t have it, and the order has been suspended due to an “inability to pay.”
The case embarks on new territory as crowdfunding sites have gained notoriety for rapidly funding noble social movements and frivolous causes alike. The relative ease in setting up crowdfunding campaigns to help pay for college tuition, vacation, startup initiatives, medical bills, or crime victims is what makes sites appealing and potentially shady.
Nineteen crowdfunding campaigns were created in the wake of Eric Garner’s death collected more than $120,000. Garner’s family didn’t authorize or endorse the campaigns and, as of initial reporting, hadn’t received any of the money raised despite claims that funds were being collected on their behalf.
Skepticism over the legitimacy of some campaigns, however, has grown as law enforcement agencies more apt to investigating possible fraud cases.