FTC takes action against crowdfunding fraudster
Contributing to a crowdfunding campaign isinherently risky. Even when the intentions of those responsible for theprojects are honorable, a project can easily fall over, potentially leavingcontributors out of pocket. But in its first legal action against a crowdfundedproject, the US Federal Trade Commission (FTC) has gone after the projectcreator of a Kickstarter campaign who pocketed most of the money contributed by backers.
The Doom That Came To Atlantic City gained widespread attention for all the wrong reasons in 2013. It was tobe Monopoly-style board game inspired by H.P. Lovecraft's Cthulhu Mythos, whereplayers take on the role of powerful deities called Great Old Ones and wreakhavoc on Atlantic City. Most game-related campaigns don't reach their fundinggoals, but with illustrator Lee Moyer and experienced game designer Keith Bakerresponsible for creating the game, thecampaign flew past its US$35,000 goal and reached almost $123,000 in pledges bythe time the campaign wound up on June 6, 2012.
But 14 months after the campaign ended,Erik Chevalier, who launched the campaign and established The Forking Path Co.to produce the game, told backers that the project was being canceled and he wouldbe refunding their money. The problem is, he didn't. Instead, the FTC claims hespent the money on personal expenses, including rent, relocating himself toOregon, personal equipment, and licenses for a different project. Baker andMoyer also denied being paid any money for the project.
In response to the legal action, Chevalierhas agreed to a settlement prohibiting him "from deceptive representationsrelated to any crowdfunding campaigns in the future" and requiring him tohonor any publicly stated refund policy. Although the settlement order imposesa $111,793.71 judgment against Chevalier, this is suspended due to hisinability to pay. If the FTC discovers he has misrepresented his financialcircumstances, then the full amount would become due immediately.
"Many consumers enjoy the opportunity to takepart in the development of a product or service through crowdfunding, and theygenerally know there’s some uncertainty involved in helping start somethingnew," said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection."But consumers should be able to trust their money will actually be spenton the project they funded."
The backers of The Doom ThatCame To Atlantic City would likely agree, and the episode didn't end up being a completeloss for them. Cryptozoic Entertainment ended up publishing the game andprovided copies to all Kickstarter backers. However, those that backed higherpledge levels that offered rewards, such as custom art and limited editionpewter figurines, have ended up shelling out a significant amount of money for just the game – which was delivered by another company.
Still, the FTC action signals a willingness to take legal action in the often murky crowdfunding arena and will hopefully helprein in fraudulent crowdfunding campaigns – but, as is always the case whenbacking a crowdfunding campaign, caveat emptor.