DD Support Board and Research Team

[scion]

FTC Takes Action Against Failed Kickstarter Campaign

Posted by Anton Root
Jun 12, 2015 12:00 pm GMT
http://www.crowdsourcing.org/editorial/ftc-takes-action-against-failed-kickstarter-campaign/49960

The Federal Trade Commission (FTC) has taken legal action against the creator of a failed Kickstarter campaign. It’s the first such ruling made against a crowdfunding campaign owner.

Erik Chevalier of The Forking Path Co. has agreed to a settlement that prohibits him from “deceptive representations related to any crowdfunding campaigns in the future and requires him to honor any stated refund policy.”

Related:
- Kickstarter Funded Board Game Canceled After Six Figure Raise

As we reported two years ago, Chevalier raised over $120,000 (well above his original $35,000 goal) from 1246 backers to create a board game called ‘The Doom That Came to Atlantic City.’ After a series of seemingly positive updates, Chevalier finally came clean and wrote, “the project is over, the game is canceled.”

The campaign may have been just another example of a Kickstarter entrepreneur getting in over his head — after all, many companies with good intentions simply fail. According to the FTC, however, that’s not the case with Chevalier.

In the complaint, the commission stated that Chevalier “never hired artists for the board game and instead used the consumers’ funds for miscellaneous personal equipment, rent for a personal residence, and licenses for a separate project.”

Under the settlement, Chevalier is ordered to pay $111,793.71, but the order is suspended because of his inability to pay. In a tweet, the FTC stated that if staff finds he misrepresented his financial condition, judgment would be due and the commission would pursue legal action to collect the funds. Chevalier, who wrote that he hopes to eventually refund everyone, is also prohibited from “failing to honor stated refund policies."

“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,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection in a statement. “But consumers should be able to trust their money will actually be spent on the project they funded.”

Fortunately for backers of the campaign, another company stepped up and delivered the board games (but not other rewards). The FTC’s announcement should provide further consolation.

The FTC has recently been focused on protecting consumers who are using emerging financial technology services. That the commission took legal action against a crowdfunding fraudster is a great sign and should be a cautionary tale for anyone else thinking about scamming backers out of their money.

But it's only one such case; the FTC should continue to police crowdfunding fraud if it's to have a lasting effect. In a tweet, the commission stated that it cannot disclose whether it is looking at any other failed campaigns, but that it is "aware of potential for fraud in FinTech platforms."

http://www.crowdsourcing.org/editorial/ftc-takes-action-against-failed-kickstarter-campaign/49960