Crowdfunding Sites Get Major Blow As FTC Settles First Fraud Case

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Crowdfunding Sites Get Major Blow As FTC Settles First Fraud Case | ThinkProgress
  • Profile picture of the author Cali16
    Not at all suprised that people abuse those sites. I think it's a good thing the FTC is looking into them.

    It's heartbreaking to see good people generously send money in good faith, not knowing that they're donating it to the selfish cause of a dishonest scumbag.
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    • Profile picture of the author writeaway
      Originally Posted by Cali16 View Post

      Not at all suprised that people abuse those sites. I think it's a good thing the FTC is looking into them.

      It's heartbreaking to see good people generously send money in good faith, not knowing that they're donating it to the selfish cause of a dishonest scumbag.
      Exactly.

      It was only a matter of time.

      Hopefully, this sends a strong enough signal to people to get their act together.
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  • Profile picture of the author yukon
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    The Federal Trade Commission settled its first crowdfunding fraud case involving a man, Erik Chevalier, who collecting $122,000 through Kickstarter meant to fund a board game, The Doom That Came to Atlantic City, he never made. Chevalier instead used the money to live, pay his rent and relocate.

    Chevalier promised perks to the 1,246 supporters who contributed to his campaign, including a final copy of the game or “specially designed pewter game figurines,” the FTC said in a news release. Those backers never got the swag.
    He could have probably turned that $122K into half a million dollars within a year. He had buyers of a board game which requires multiple players, which means free advertising.

    If I was the judge I would have thrown him in jail for being a moron.

    [edit]
    The board itself looks like he copied Monopoly.
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    • Profile picture of the author seasoned
      Originally Posted by yukon View Post

      He could have probably turned that $122K into half a million dollars within a year. He had buyers of a board game which requires multiple players, which means free advertising.

      If I was the judge I would have thrown him in jail for being a moron.

      [edit]
      The board itself looks like he copied Monopoly.
      Well, monopoly was a tweaked of a game sold by a guy that had NOTHING to do with it! The REAL designer of the game that became the game that became the game known as monopoly may NEVER be known! It was a game played by board people that was meant to be a kind of virtual game built on local reality. For playing pieces, they used KNICK KNACKS, which is why you have the thimple, dog, etc... The guy that sold the game to be commercialized apparently traveled, found out about the idea, created his own VARIANT, and sold it.

      Steve
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      • Profile picture of the author AprilCT
        Kay, I have no idea how so many small gifts of money are counted for income tax purposes. Even when someone gets a lump sum, minus the expenses of the crowd funding site, those were all still different people who make personal gifts of money.

        I really despise the dirt bags that take advantage of other people's good will and desire to donate to worthy causes. There are so many really worthwhile causes, but it sure would be difficult to check them out to be sure it's not a scam.

        The other thing that bugs me is the skimming off the top from each person requesting donations instead of a site just dedicated to helping those in need. Yes, I know websites cost, but surely there is a way to fund themselves with advertising? Maybe, maybe not.

        I know local fundraisers here often designate a bank that collects incoming donations in a special account. I would assume the banks charge some fee for the set-up as well, but I honestly don't know. I would hardly think it is a percentage like most of the online sites.
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  • Profile picture of the author GforceSage
    It's only a major blow to scammers.

    Once you make your special offer for payback considerations, the fundee should have to meet with a rep from the crowd sourcing company and figure out what the cost of the payback item/service is.
    Once the cost is figured, there should be a "Good Faith Escrow Account," set up that is matched dollar for dollar until the payback promissory cost is met. So every time a dollar goes into the crowdfunding account, a dollar also goes into an account to secure the payback promise.

    The funds for the payback consideration should be released separately. If the person who opened the crowdfunding request does not fulfill their obligation within 20 months or the time specified in the offering, than the funds convert to a loan that must be paid back on a reasonable schedule. In the event of a default, each donor could have a credit amount put back into their crowdfunding account to use on someone else. If necessary, associated knocks could go on the scammers credit for defaulting on ones financial obligations. Much like the way Doctors/hospitals can do it. You can still maintain the spirit of crowdfunding for those who truly have good intentions, but it would convert to real world consequences for scammers.

    The FTC does not want online protocol becoming so loose that we assume everyone can operate by trust alone. There will always be those who will abuse anything that involves financial gain. The new Uber way of having everyone be a part of the process instead of specialists has lead to myriad of legal considerations that are difficult to deal with when things go bad.
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  • Profile picture of the author salegurus
    No surprise at all...
    The world is filled with low life scumbags who will turn on their own families for a dime, only obvious that they would gravitate to these sites. It's an easy scam for them to pull off...
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    • Profile picture of the author Kay King
      I think the ruling could make things worse - for a while.

      The FTC ordered Chevalier to repay the money, but he doesn’t have it, and the order has been suspended due to an “inability to pay.”
      The message is "if you can't pay - what are they going to do"?

      He should have to pay - either in cash or in time served.

      Then again....supposed he claimed that money as income on his taxes? Could be a second wave of "gotcha" coming.
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      • Profile picture of the author Cali16
        Originally Posted by Kay King View Post

        I think the ruling could make things worse - for a while.

        The message is "if you can't pay - what are they going to do"?

        He should have to pay - either in cash or in time served.
        That was my thought as well. If he doesn't have the money, then he can spend some time behind bars. He knew exactly what he was doing.
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        • Profile picture of the author Karen Blundell
          people like Chevalier ruin things for everyone else - I'm sure some people would think twice before investing via a crowdfunding site in future because of this
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      • Profile picture of the author Floyd Fisher
        Originally Posted by Kay King View Post

        I think the ruling could make things worse - for a while.

        The message is "if you can't pay - what are they going to do"?

        He should have to pay - either in cash or in time served.

        Then again....supposed he claimed that money as income on his taxes? Could be a second wave of "gotcha" coming.




        Yep....the IRS is nothing you want to mess around with...just ask Mike Tyson.
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  • Profile picture of the author agc
    I'm unclear on the logic of how it could possibly be bad for Crowdfunding if the federal government cracks the nuts of the scammers and cheaters. Seems to me this would be a great big BOON to crowdfunding, increasing the trust and integrity of the crowdfunding market.

    Sounds like some mighty fuzzy thinking to call this a "major blow" to crowdfunding rather than a major blow to scammers. Maybe the author is a complete retard and incapable of analysis based on logic?

    Or maybe the author has no integrity and is letting their personal bias show itself in the writing of the headline?

    Or maybe the author wanted to hype the headline to get attention and ended up misleading the audience once they had corrupted the integrity of their work?

    Regardless the specifics in this case, it serves as a great example of what is wrong and broken with the "cult of the amateur" print media model that is rapidly replacing professional reporters and professional editors with the written standards of their lawsuit vulnerable owners.
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    • Profile picture of the author seasoned
      Originally Posted by agc View Post

      I'm unclear on the logic of how it could possibly be bad for Crowdfunding if the federal government cracks the nuts of the scammers and cheaters. Seems to me this would be a great big BOON to crowdfunding, increasing the trust and integrity of the crowdfunding market.
      You CLEARLY don't know how the US "government" "works". What happens, is they take a problem like this, morph it to fit their agenda, and then go crazy claiming all these STUPID rules will HELP, and they mostly hurt or cost a fortune.

      Supposedly, for example, we had bank depository receipts that could be used. The US decided to create a para government agency that issued a kind of currency, that worked in the same way. Eventually, they forgot what a promise was, decided this was a mere feature, and made it ILLEGAL! Or look at the idea of a free medical system. They changed THAT also. Insurance? SAME THING! Now it would be GREAT if they were honest, but costs went up, quality mostly went DOWN, etc....

      INTERESTING FACTOID, just to help REALLY invalidate what they claimed.... The BDR? STILL gone, but now they have ADRs! SAME concept, with foreign investments. ALSO, we have cashiers checks, postal receipts, and credit cards. The medical system? WELL, we now have a supplements law, though they DID break that several times! INSURANCE? Well, there are some that I guess are trying to wedge into the old AMISH rules.

      Sounds like some mighty fuzzy thinking to call this a "major blow" to crowdfunding rather than a major blow to scammers.
      YEAH, but those idiots "make the laws"!

      Maybe the author is a complete retard and incapable of analysis based on logic?
      Or MAYBE he knows history!

      Regardless the specifics in this case, it serves as a great example of what is wrong and broken with the "cult of the amateur" print media model that is rapidly replacing professional reporters and professional editors with the written standards of their lawsuit vulnerable owners.
      NOPE! It shows how incredibly stupid the government is.

      Steve
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  • Profile picture of the author Floyd Fisher
    Here's what I don't get.


    Why is the FTC involved, and not the SEC?


    Just think this kind of criminal activity would be similar to the Ponzi schemes, hence the 'donations' could be considered securities (especially when there are promises attached to the donations like for every $10 you get a plush animal toy).


    Maybe I'm a little off here....could a lawyer explain this to me?
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  • Profile picture of the author agc
    crowdfunding (as I understand it) isnt selling a "share in the company" (securities), rather it's "pre-selling a product" (trade) that doesn't exist so the seller can afford to go make the product.
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