The FTC Goes After Its First Failed Crowdfunding Campaign

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Gillmor Gang LIVE 06.12.15

The Federal Trade Commission just posted some fascinating details regarding a settlement related to a failed crowdfunded project. The project, a board game called The Doom That Came to Atlantic City, raised $122,874 and failed to deliver. The creators, Lee Moyer and Keith Baker, had planned to manufacture and ship the Cthulhu-themed board game in 2013 but their manufacturer, Erik Chevalier of Forking Path, was unable to complete the project. Chevalier is accused of failing to refund the money and spending “most of the money on unrelated personal expenses such as rent, moving himself to Oregon, personal equipment, and licenses for a different project.”

The settlement requires Chevalier to pay back the $111,793.71 given him by the funders when and if his “financial condition” improves. Writes the FTC:

Under the settlement order, Chevalier is prohibited from making misrepresentations about any crowdfunding campaign and from failing to honor stated refund policies. He is also barred from disclosing or otherwise benefiting from customers’ personal information, and failing to dispose of such information properly. The order imposes a $111,793.71 judgment that will be suspended due to Chevalier’s inability to pay. The full amount will become due immediately if he is found to have misrepresented his financial condition.

The FTC even took to Twitter to talk about the case, noting that details of the case are secret (“Details of FTC investigations are nonpublic so can’t discuss specifics. #AskFTC “) but that they expect crowdfunded project managers to treat customers fairly.

This move sets a very interesting precedent in the world of crowdfunding. Now that the FTC can step in and negotiate settlements with creators it should give scammers pause and non-serious project builders even bigger cause for concern. While a little over $100,000 is chicken feed in comparison to the numbers the FTC traditionally deals with, it still shows that the organization has its eye on the many failed promises that can be found on Indiegogo and Kickstarter.

The FTC made it clear that this settlement was about false promises by a the producer and is not directly related to the process of crowdfunding or Kickstarter itself. That said, it does show us who the government will tend to blame when and if the next major campaign fizzles out.