The FTC finally cracks down on fraudulent crowdfunding campaigns

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The Federal Trade Commission (FTC) took its first swim in the sea of crowdfunding campaigns to call out a Kickstarter project for not delivering the goods, reports Recode.

The Kickstarter campaign in question belonged to one Erik Chevalier, an Oregon man who asked for $35,000 in order to get his board game, The Doom That Came To Atlantic City! off the ground. By the time the campaign ended, he managed to raise $122,000 from 1,246 people, the majority of which went for higher tiers in order to get rewards.

Unfortunately for the backers, Chevalier announced that his project was cancelled 14 months after his Kickstarter campaign ended. Instead of returning the money, however, FTC investigators found he spent it on personal expenses, which included his move to Oregon. Fortunately for the backers, publisher Cryptozoic stepped up and offered them free copies of the board game.

As for Chevalier, according to the settlement order, he is barred from making any misrepresentations about any future crowdfunding campaigns, not honoring stated refund policies, and making any customer information public. In addition, because of his financial standing, the $111,793.71 fine that he owes is suspended, though the full amount will be due immediately, if investigators find he was lying about his inability to pay.

Such an action by the FTC represents the first time it has decided to enter the world of crowdfunding and take action on a fraudulent campaign. Based on this recent move, we can assume the FTC will take action when a crowdfunding campaign meets its goal and fails to fulfill its commitment, rather than when a campaign is still trying to work its way there. Regardless, this is a landmark move by the FTC and one that is likely to dictate the method for dealing with future fraudulent crowdfunding campaigns.


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