The Federal Trade Commission recently reached a settlement with Erik Chevalier, an Oregon man that had employed “unfair or deceptive acts” to persuade more than one thousand people to donate $122,000 on the popular crowdfunding site Kickstarter.
According to the commission, backers were lied to when the man said on the site that he would be using the money to develop a new fantasy board game. Instead, he paid his rent and spent most of the cash on personal items.
Kickstarter does not face charges in the case. But a complaint against Chevalier was filed Wednesday with the U.S. District Court for the District of Oregon Portland Division.
It is the first time, however, when the federal agency steps in to protect users from online fraud in a flourishing crowdfunding industry.
There are about 1,250 crowdfunding sites on four continents. The platforms managed to raise more than $16 billion worth of donations last year alone. This marks an increase of 167 percent from two years ago, according to Massolution.
Startups and business benefited from 40 percent of the raised money in 2014, while three years ago only 27 percent went to the business sector. Other causes were linked to the film industry, arts, music, social issues and real estate.
According to Kickstarter’s terms of service, users can raise money only for creative projects, but they are prohibited to request funds for charity or equity.
Three years ago, the Kickstarter scammer started a 30-day fundraising campaign whose initial goal was to raise $35,000 for a new board game entitled “The Doom That Came to Atlantic City.”
Chevalier promised on his campaign page that he would use the money to cover startup expenses and costs of game production. He also promised he would offer backers deluxe copies of the game for a minimum donation of $75 or fancy game pieces for a donation of $105 or more.
Chevalier also posted on Kickstarter a video with him explaining the rules of the board game and several players playing a prototype game.
Between 6 May 2012 and 6 June 2012 his project raised $122,874 from more than one thousand people, of whom 85 percent had contributed with more than $75.
Over the course of one year, Chevalier reported several delays in the project caused by either legal issues or manufacturing problems. But in 2013, he dropped the project telling backers that the “money was approaching a point of no return,” after a series of useless investments in staff, location and product.
Nevertheless, the FTC disclosed that no money was invested in the project since Chevalier spent it all on himself. According to the settlement, the FTC gave him an $111,793 fine which was suspended because he lacked funds. Chevalier also received a life ban to raise money on crowdfunding sites.
Image Source: Vita.it
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