FTC Cracks Down on Kickstarter Fraud for First Time
Erik Chevalier’s idea seemed pretty cool. Take money from an online Kickstarter campaign and use it to develop a board game. Those who put in enough money would get copies of the game and special pewter game pieces for their trouble.
Chevalier collected more than $122,000 from 1,246 backers ostensibly to fund “The Doom That Came to Atlantic City.” But instead of producing a game, he spent the money on rent and other things. For that, the Federal Trade Commission (FTC) created a game of its own—“Prosecute Kickstarter Fraud” and Chevalier was the first player.
“Many consumers enjoy the opportunity to take part in the development of a product or service through crowdfunding, and they generally know there’s some uncertainty involved in helping start something new,” Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said in a release. “But consumers should be able to trust their money will actually be spent on the project they funded.”
Chevalier did not admit guilt in the settlement (pdf) before a U.S. District Court in Portland, Oregon, but he did agree to being prohibited from making misrepresentations about any crowdfunding campaign. He is also required to honor his stated refund policies. A judgement of $111,793.71 against Chevalier and his company, The Forking Path, to repay the Kickstarter loans was suspended because he doesn’t have the money to pay it.
Chevalier’s backers at least got some reward. Cryptozoic Entertainment rescued the game after Chevalier announced its cancellation and gave all backers a copy, according to Andrea Peterson of The Washington Post.
To Learn More:
Crowdfunding Project Creator Settles FTC Charges of Deception (Federal Trade Commission)
Game Over: FTC Goes After Board Game Campaign Gone Wrong In First Crowdfunding Case (by Andrea Peterson, Washington Post)
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