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FTC announces it will go after scummy Kickstarter projects that steal backers' money

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The consumer protection agency wants people to feel safe giving to crowdsourcing sites

Crowdfunding platforms like Kickstarter and IndieGogo have grown rapidly over the last five years, taking in more than $1 billion in pledges for project creators. Naturally a few projects failed to deliver on their promises, despite taking people's money. Sometimes it was the fault of honest errors, other times backers alleged creators had abused their funds. Today the FTC announced it has taken its first action against a fraudulent Kickstarter project, The Doom That Came to Atlantic City, a board game that raised $122,000 from 1,246 backers, but failed to deliver any of its rewards.

"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," said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. "But consumers should be able to trust their money will actually be spent on the project they funded."

"Consumers should able to trust their money will actually be spent on the project they funded."

An FTC investigation found that project creator Erik Chevalier canceled the project after 14 months, promising his backers a refund he never delivered. According to their report, he "spent most of the money on unrelated personal expenses such as rent, moving himself to Oregon, personal equipment, and licenses for a different project."

The agency has ordered Chevalier to refund all donations to backers, but suspended that order while they investigate whether he has any money left to give. It also highlighted that "the Commission files a complaint when it has 'reason to believe' that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest." In other words, projects that fail to deliver because they genuinely can't fulfill difficult or impossible promises won't be on the hook with the FTC. From a potato salad to a smartwatch, the best rule of thumb for crowdfunding projects is still "backer beware."

"Kickstarter has empowered millions of people to be part of the development and production of new creative works. Kickstarter creators have an incredible track record when it comes to following through on their promises. But creators who abuse our system and backers’ trust expose themselves to legal action," said Kickstarter's David Gallagher. "That another creator stepped in to produce this game and get it into the hands of backers is a testament to the goodwill and spirit of the Kickstarter community."