Fund Me or Fraud Me? Crowdfunding Scams Are on the Rise

Crowdfunding site Kickstarter proclaims, “We welcome and support projects in diverse categories,” such as arts, photography, technology, and theater. How about in scamming?

Because crowdfunding is built on trust, it’s ripe for fraud. People solicit money from strangers for their projects, usually through online platforms like Kickstarter, Indiegogo, or GoFundMe. In return, they usually offer rewards—a sample of their product, for example, a commemorative t-shirt, or digital downloads. But whereas in the past, a network of friends and family could vouch for their credibility before contributing cash, today’s “creators” are only as reliable as their promises. And those promises don’t always deliver.

The Federal Trade Commission recently settled its first crowdfunding fraud case against a project creator who scammed contributors out of more than $122,000. Erik Chevalier, using the business name The Forking Path Co., asked for funding to produce a board game called The Doom of Atlantic City, which had been designed by two prominent board-game artists. Nearly 1,250 backers pledged $75 or more hoping to get a copy of the game or one of its prized figurines. Over 14 months, Chevalier provided periodic “updates” on his progress. Then he announced that he was canceling the project.

Although Chevalier promised to refund the contributions, in fact, according to the FTC’s complaint, Chevalier neither refunded the money nor provided any rewards. Instead, he spent the money on unrelated personal expenses, including rent, moving to Oregon, personal equipment and licenses for a different project.