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These Could Be The Kickstarters The Feds Go After Next

This article is more than 8 years old.

Earlier this month, the Federal Trade Commission fined Erik Chevalier nearly $112,000 for deceiving the backers of his Kickstarter campaign—a board game titled "The Doom That Came to Atlantic City"—and failing to refund donations after he cancelled the project. It marked the first time the FTC took legal action against a crowdfunding campaign.

Now that the FTC has signaled its willingness to delve into the nebulous world of crowdfunding, Chevalier’s case is likely the first of many. According to Helen Wong, an attorney with the FTC, investigators used consumer complaints in the case against Chevalier and the government agency will continue to listen to such complaints as it monitors the crowdfunding space moving forward. To identify other allegedly fraudulent campaigns that could be the next investigation targets, Forbes filed a Freedom of Information Act request with the FTC, seeking all complaints filed with the government agency about Kickstarter campaigns.

"We have a variety of different statutes that we enforce but for the FTC to act—and in this case in particular—we are focusing on deception and misrepresentation to consumers," Wong told Forbes. "Basically, it is what you are telling customers and what you are doing on the back end—those things have to match."

Over the past several years, crowdfunding platforms like Kickstarter and Indiegogo have grown into burgeoning communities where the creative thrive and great ideas come to life--but they are not without their failings. Bad actors use the platforms as avenues for deception, exploiting innocent consumers for personal gain.

Forbes’ FOIA request yielded dozens of campaigns accused by consumers of deceptive practices or creators’ failure to deliver on promises. Historically, consumers in these situations are left with little recourse because the companies behind these platforms absolve themselves of any responsibility if campaigns go awry. Now, the FTC might offer these consumers restitution.

"We are always looking for consumer redress so we always try to the extent we can, give consumers their money back," said Wong. "We are also looking for injunctive relief to make sure that this behavior doesn’t happen again."

On Kickstarter, creators receive the money pledged by backers only if their fundraising campaign reaches its pre-stated goal. But successfully funded projects don't always come to fruition. In the consumer complaints filed against Kickstarter campaigns, a few addressed other issues such as copyright infringement, but the overwhelming majority were against creators of successfully funded campaigns who failed to deliver the product or service—much like Chevalier. Of this camp, two projects received multiple complaints.

The first was for a small, portable thermal printer, the mPrinter. Launched in 2012, the Kickstarter campaign vastly outstripped its original $10,000 funding goal and raised $88,018 from 706 backers. There are hundreds of negative comments posted by backers on the Kickstarter’s page about creator Andy Muldowney’s lack of follow through. As recently as last week backers complained of not yet receiving the product.

"At some level I had made peace before you wrote again and started making new promises!... Now you've just reminded me how angry and disappointed I was before!!! $100 [to] $200 bucks won't make any of us richer or poorer, it's a matter or principles and values. Shame on you for taking what's not your's," Jose Marcos posted on April 8.

The second Kickstarter campaign with multiple complaints in Forbes’ FOIA request results was for the debut album for musician Jordis Unga. The campaign raised $75,949 from 1,424 backers—well over twice its $33,300 funding goal. Based off comments on the Kickstarter’s page, some posted as recently as two weeks ago, several backers still had not received the CDs and photos Unga promised.

“I still haven't received the autographed CD for the pledge I made three years ago. I even sent a private message with my updated mailing address, but I never got a response. At this point, I'm not interested in the album any more,” Elizabeth Evangelista posted on April 10.

Another campaign, the gStick—a computer mouse that you hold like a pen—garnered an impressive number of backers among the Kickstarter projects with FTC complaints. The project far surpassed its goal of $40,000, raising $130,463 from 3,948 backers in 2013. Based on comments on the Kickstarter's page, supporters still haven't seen a return on their donations. Backers of the gStick campaign are also openly hostile toward the project’s creator, Gordon Alan Stewart in the comments on the project's page.

Just last week, Kickstarter user "Hyowon," posted: “What's amazing is that Gordon and many other slow or failing OR failed projects seem to think it is adequate to post empty meaningless updates that offer no validity whatsoever. I mean why bother? To show your backers you are doing something and hiding from the government and FTC? Posting something pointless [equals] you didn't run away with our money? Refund please.”

Forbes attempted to contact the creators behind the gStick, Jordis Unga CD and the mPrinter Kickstarter campaigns for comment and have not heard back.

Kickstarter campaigns which receive FTC consumer complaints aren't  necessarily fraudulent. In the case of  the Gramofon music player, the most successful campaign with a complaint in our FOIA results in terms of both funding and support, a consumer expressed dissatisfaction with the product and customer support in his or her complaint.

"Plain and simple the product promised to allow me to play music from my phone to the Gramofon," reads the FTC complaint against Gramofon, which r eceived of $315,295 in funding ($65,295 more than its funding target) from 4,883 backers. "This function, among other features, do not work. The company makes you login through Facebook first in order for the functions to work. Like many others, I do not want to share that information with a [third] party. I contacted Kickstarter about a refund and they told me I would need to speak with Gramofon directly for customer service issues. I contacted Gramofon and told me they would not refund my money and I would need to wait for the product to be updated so I could use it without having to login through Facebook." 

While there are complaints about miscommunication and delays in the product's integration of AllPlay—an audio platform that creates compatibility between devices and multiple streaming services from Qualcomm —on the Kickstarter's campaign page, Gramofon (which is part of the wifi network company Fon) ran a very successful Kickstarter campaign that appears to have delivered on its promises. The product was released during the third quarter of last year and since the complaint was filed, Gramofon has successfully integrated AllPlay, which has received positive feedback from both users and press.

"From beginning to end we knew what we were creating and we knew where we had to go. Kickstarter was something that we were very passionate about and we believed in," said Stephen O'Reilly, head of sales and marketing at Gramofon.

Below, you can see a selection of the Kickstarter campaigns with consumer complaints, obtained through Forbes' FOIA request, based on both backers and funding. Those featured have either recent complaints from backers on their campaign pages that indicate that they have either not received their product or refund and or lack a recent progress update from their creators.