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FTC, Federal Court Views on Fraud In Crowdfunding Ventures
In a release this summer, the Federal Trade Commission (FTC) announced it had brought and settled its first case involving crowd-funding. The defendant, Erik Chevalier, raised more than $122,000 through Kickstarter to produce The Doom That Came to Atlantic City, a Monopoly-like board game geared towards H.P. Lovecraft fans. According to the FTC's complaint, Chevalier instead used the Kickstarter proceeds to pay for personal expenses, including his move to Oregon. The FTC/Chevalier settlement order should serve as a reminder that strong legal remedies at both the state and federal level are available to defrauded contributors. Content creators considering a donation crowd-funding campaign need to understand the level of communication that backers expect and should be prepared to refund any remaining contributions if it turns out the intended benefits cannot be delivered.
Kickstarter Fail
The Doom campaign looked like a Kickstarter success story at the outset. Chevalier aimed to raise $35,000 over a 30-day period in order to fund development, production, completion and distribution of the board game. In turn, he promised specific rewards, such as collectable figurines, to contributors if the campaign reached its goal. Chevalier ultimately raised more than four times the requested amount, collected from 1,246 backers.
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