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The FTC is investigating a crowdfunding campaign that disappeared with more than $700K

The FTC is investigating a crowdfunding campaign that disappeared with more than $700K

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The Federal Trade Commission might have a renewed interest in justice for crowdfunding backers. Emails seen by The Verge show that the agency is investigating at least one crowdfunding campaign gone bad — the iBackPack — which raised more than $700,000 across both Indiegogo and Kickstarter.

The backpack’s creator, Doug Monahan, marketed the device as a Wi-Fi-enabled, battery-packed backpack that would power gadgets on the go and provide a local hot spot for wearers’ friends. It launched on Indiegogo in 2015 and Kickstarter in 2016. Years later, the backpack has yet to ship, although some backers did receive “beta” device accessories, like batteries and cables, some time ago. Monahan’s two previous campaigns never reached their funding goals, but they were eventually used to market the iBackPack.

These backers tell The Verge that an FTC agent began reaching out to them this week in an effort to research the campaign. The emails all say the same thing:

“My name is [name redacted] and I am with the Federal Trade Commission, Bureau of Consumer Protection. Our office received numerous complaints from consumers that they never received the iBackpack they ordered. We reached out to the crowdfunding platforms that offered the product to get a list of backers and that is how I obtained your email address. I just wanted to see if you ever received the backpack? I would really appreciate it if you could let me know, as we would like to take steps from preventing further fraud in the crowdfunding platforms. Thank you in advance. If you have any questions, please give me a call at [number redacted].”

In a statement to The Verge, the FTC said, “FTC investigations are nonpublic so we generally don’t comment on whether we are investigating a company or not.” The name and number on the email check out as a legitimate FTC employee, and the address belongs to the .gov domain.

Kickstarter confirmed the FTC’s investigation in a statement to The Verge. “Last year we received and responded to a civil investigative demand from the FTC seeking information about this project,” a spokesperson said. “The vast majority of Kickstarter creators complete their projects as promised, but those who abuse our system and the trust of backers expose themselves to legal action.”

An Indiegogo spokesperson wouldn’t comment on “rumored or pending investigations” to “ensure that we do not disrupt those investigations.” The company also noted that it makes “every effort to comply with law enforcement when an investigation is underway.”

The backers want justice

The FTC only once publicly investigated a crowdfunding campaign in 2015. Erik Chevalier raised more than $122,000 for a board game and later sold backers’ data to outside firms. The FTC settled with Chevalier for close to $112,000. He was subsequently ordered to stop disclosing or benefitting from customers’ personal information. The FTC also banned him from misrepresenting any future crowdfunding campaigns or lying about refund policies. (Chevalier told backers they’d get their money back, which never happened.) The FTC wanted him to repay backers, but he apparently spent all their money on rent and other personal expenses, so he couldn’t do so.

At the time, the FTC said it was okay with the core idea of crowdfunding and the risks involved, but it did want to make sure backers’ money truly went toward a product and that creators didn’t run off with it. “Consumers should be able to trust their money will actually be spent on the project they funded,” said Jessica Rich, who was the then-director of the FTC’s Bureau of Consumer Protection.

Some campaigns have sold backers’ personal data

The iBackpack backers believe Monahan sold their information to other crowdfunding companies, as evidenced by communications they’ve had with some of these groups. They’ve also been told that the years-long delays had to do with undefined battery issues, including possible lithium-ion battery explosions. Monahan last posted an update to Kickstarter and Indiegogo in March 2017.

One backer said he was told by the FTC agent over email that the agency will “always try to recover any money we can for consumers when we file cases in court. Unfortunately, if the money has already been spent by the company or individual there is no money to recover.”

The website for iBackPack no longer functions, nor does the listed email address, and Monahan is completely incommunicado. The backers hope the FTC can find him and recover their funds, or at least bring his ill-fated campaign to light.