The U.S. Federal Trade Commission just cracked down on alleged deceptive trade practices in a Kickstarter crowdfunding campaign.
According to the FTC, funds were raised for a project to produce a board game. However, the fundraiser never delivered the rewards he promised to his financial backers and he didn’t offer refunds either. Instead, he spent the money on personal expenses and other items unrelated to the board game.
It’s important to note that there was no allegation of wrongdoing by Kickstarter. The FTC went after the fundraiser.
Under the settlement reached with the FTC, the fundraiser “is prohibited from making misrepresentations about any crowdfunding campaign and from failing to honor stated refund policies. He is also barred from disclosing or otherwise benefiting from customers’ personal information, and failing to dispose of such information properly. The order imposes a $111,793.71 judgment that will be suspended due to [his] inability to pay. The full amount will become due immediately if he is found to have misrepresented his financial condition.”
Lesson to learn? If you’re going to crowdfund to raise money, be sure to honor your commitments. Taking the money and spending it on yourself is a bad idea from both a legal and ethical standpoint.
Related reading: Crowdfunding Project Creator Settles FTC Charges of Deception