You’re on KickStarter or GoFundMe’s website. You see an investment that’s too good to be true, and there’s already thousands of dollars committed to this campaign.
You’re tempted to invest money in the campaign, but you’re waiting on a surefire product to come along before handing over any money for an upstart company with an innovative idea or approach.
A few months pass, and you begin to wonder about what became of the company or their campaign.
Fortunately for you, it wasn’t the next Steve Jobs or Bill Gates seeking the funding.
But hundreds of other investors aren’t as lucky as you. Worse yet, they are still left wondering what happened to their investment as no money has returned to their pockets.
Crowdfunding scams like the scenario above are becoming more worrisome for would-be entrepreneurs. Questions like how much money will be returned from an investment opportunity are being replaced with will any money be returned?
The same worries hold true for the Federal Trade Commission (FTC) as the group has started to crack down on crowdfunding scam artists. The first known takedown involves Erik Chevalier, an individual who raised money via Kickstarter for a board game called “The Doom That Came to Atlantic City.”
Chevalier raised more than $122,000 from 1,246 backers. For months, he continued to post updates to the board game while he allegedly used the money for rent and moving, among other non-related items. More than a year later, Chevalier cancelled the campaign and promised to make restitution payments to his backers.
The FTC – which voted unanimously to fine the individual – levied over $111,000 judgment against him. However, that settlement is delayed because of his current financial situation. Currently unemployed, Chevalier is unable to pay the fine or reimburse his investors any money.
While scams involving crowdfunding websites can happen, the websites themselves are taking actions to ensure the scams are few and far between. Currently, several organizations have joined together to create CAPS, or the Crowdfunding Accreditation for Platform Standards. This initiative’s aim is to create operational transparency through better operational procedures, according to their website.
Their hope is that through secured, accredited platforms, scams like the one perpetrated by Chevalier are the exception and not the rule.
