Creator Behind Crowd-Funded Boardgame That Failed To Materialize Draws Settlement Agreement From FTC
from the and-all-cries-of-'force-majeure'-were-for-naught dept
Screwing backers of crowdfunded projects may no longer be as free from consequence as it used to. The Federal Trade Commission has (finally, some might say) decided to tackle a failed Kickstarter and hold the person behind it responsible (sort of) for walking away from a dead project with over $100,000 in backers' cash.
Erik Chevalier, d/b/a The Forking Path, hit Kickstarter with a plan for a boardgame featuring "Lovecraftian urban destruction" and a goal of $35,000. By the time the clock wound down, Chevalier was sitting on $123,000 of what would turn out to be mostly donations. That was June of 2012. By July of 2013, after numerous delays and long silences, Chevalier announced the project's demise. He also promised to start refunding backers. Apparently, only the first assertion was true. In fact, a lot of what was said to backers proved to be untrue. From the FTC complaint:
In an update issued on July 23, 2013, Defendant stated that the project was being cancelled because “the intention was to start a board game company with the Kickstarter funds” and that “[a]fter paying to form the company, for the miniature statues, moving back to Portland, getting software licenses and hiring artists to do things like rule book design and art conforming[,] the money was approaching a point of no return.”Chevalier's settlement agreement with the FTC is mostly toothless. It concedes he doesn't have the funds to pay back the $112,000 he still owes backers, thus suspending this route of recourse. The other wording in the agreement simply orders him to not being a lying swindler while utilizing crowdfunding services. In other words, behave like a normal, decent human being. Why it takes a government agency to deliver this message is beyond me, especially when it could have ordered him to steer clear of these services entirely.
In reality, Defendant never hired artists for the board game and instead used the consumers’ funds for miscellaneous personal equipment, rent for a personal residence, and licenses for a separate project.
More recently, Defendant promised consumers that he would provide an accounting of his expenses, but he has not done so. Consumers continue to file complaints regarding Defendant’s failure to provide the promised products and rewards, or refunds.
Eventually, after numerous complaints from the backers and the artistic creators of the game, another game developer stepped in and published the game and gave all backers a copy of the board game but not the other, highly-prized deliverables, such as the promised pewter figurines.
To date, Defendant has neither provided the promised reward deliverables nor refunded most of the consumers.
IT IS ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all others in active concert or participation with any of them who receive actual notice of this Order, whether acting directly or indirectly, in connection with any crowdfunding campaign, are permanently restrained and enjoined from misrepresenting or assisting others in misrepresenting, expressly or by implication:Coupled with this are some more stringent stipulations, including the FTC's monitoring of Chevalier's crowdfunding-related activity for the next 18 years, as well as giving the agency permission to pounce on any assets it deems "hidden" for the purposes of repaying Kickstarter backers.
A. the purposes for which funds raised from consumers will be used;
B. that by making a contribution, consumers will receive a specific good, service, or other reward deliverable;
C. the performance, efficacy, nature, or central characteristics of such good, service, or other reward deliverable; or
D. the qualifications or expertise of any person associated with the crowdfunding campaign.
IT IS ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all others in active concert or participation with any of them who receive actual notice ofthis Order, whether acting directly or indirectly, in connection with any crowdfunding campaign, are permanently restrained and enjoined from failing to honor any stated refund, cancellation, exchange, or repurchase policy.
An additional layer of scrutiny for crowdfunding ventures is probably a good idea, but not every funded project that dies is necessarily the result of the formative entity taking the money and running. It will be tempting to believe this is true in every case, especially if leaning on the FTC proves more effective than relying on self-policing and crowdfunding platforms Terms of Service agreements. As it stands now, there aren't many effective legal routes to demanding refunds for undelivered projects, and that has proven to be a bit of a problem, albeit far less frequently than cautionary notes to potential backers would have you believe.
If the FTC is going to regulate this like any other "trade," the deterrents will have to be a bit stronger than the terms of this settlement. The agreement with Chevalier may ward off future fraudulent attempts by him and his company, but it doesn't seem likely to scare off others who see crowdfunding as a path to quick personal enrichment.
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Filed Under: boardgame, crowdfunding, erik chevalier, failed projects, ftc
Companies: kickstarter
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SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?
BUT IN JUST THIS ONE SCAM KICKSTARTER GOT 13,500 DOLLARS FOR NO MORE THAN WEB-SITE AND MONEY TRANSFERS, WITHOUT LEAST CHECKING OR INSURANCE.
The only way to clean up Kickstarter is to toss its officers into jail and talk to them a few months later when they're ready to deal. Right now, they get money with ZERO responsibility. Are multi-level scams "free enterprise"? "Innovation"? -- No, but it's the "new business model" that Moocher Masnick wants. -- He runs Kickstarter promos every Saturday.
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Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?
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Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?
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Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?
Which is no different to stockbrokers, there is never any guarantee that patronage or investment will pay, unless you are a large corporation who can get the government, that is tax payers, to carry all the risks.
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Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?
The service is really very similar to eBay. When eBay was younger, they didn't provide any checking or insurance either. In fact, they still don't provide any checking, but they do now offer limited insurance. They decided to do so voluntarily because they thought it was good for business (and I agree), not because they were legally required to.
Kickstarter provides a legal service, and gets paid for it. It seems you don't like the service they provide. That's the beauty of a (semi-) free market--you don't have to do business with them if you don't want to. And if you think you can do it better, you're free to try. But where do you get the idea that you (or the government) can force them to provide a service they aren't interested in providing)
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Re: Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?
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Re: Re: Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?
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My guess is that the value of this settlement is that it sets some precedence for future endeavors to punish those who scam via Kickstarter.
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You call this punishment?
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KickStarter
The way I see it is Start-up Funding is a very fragile privilege, and the slightest, smallest bump, will scare off anyone who wants to help, but won't because of this example.
When it gets right down to it, Chevalier's crowdfunding still doesn't get payed back, and that's going to hurt some real innovators and 'visioneers'.
What is confusing, and perhaps I skimmed right past it, is that all of the Funders should have been given the same amount of detail and planning (that is provable), and substantiated before these funding drives start. For example, a Business Plan, a Marketing Plan, Letters of Reference, Goals and Plans, and the levels of successes achieved so far towards those goals, and why this is at KickStarter in the first place. Nevertheless, he's still called a Fraud and that's gonna scare off backers, but it will increase the amount of due diligence and research needed to protect future backers. I applaud the Gov's efforts, or lack thereof, to get this "lying swindler" to do right, but a few months in jail would have taught him a lesson or two. IT WAS FRAUD and THEFT! and not the nice kind we all saw from Wall Street Bankers and Investment Houses in 2007 thru 2009. 2010, the news atarted taking breaks from reporting stuff, 'cuz they were gonna get away with it...
In the end, it's not KickStarter's fault, they were just starting out (like it's already been said) and I'm sure their long hard look at themselves' will fix, if not already fixed, these kinds of loopholes. If I had contributed, it would have only been after seeing any and all data this thief should have been able to provide from the start - and not the rent receipts, or the lease on his new car - I'm sure it's there... you can always cancel a payment if you think you've been ripped off.
Great post. Thanks 'n' Cheers :)
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Kickstarter as overseer
For instance, instead of just blindly turning over the money collected into the project founder's grubby pockets, Kickstarter could keep control of the account until project completion and require that owners use the money to pay for only those expenses directly related to the project, with online itemization (and additional statements) detailing every withdrawal from this sort of "bank account" in order to discourage the co-mingling of business and personal funds.
While most people are basically honest and hard-working, the crowd-funding industry needs to operate from the premise that there will always be a few bad apples, ranging from the grossly incompetant to the criminal-minded types looking for a an easy way to rob and swindle.
The big question is, how many sinkholes and scams will be perpetrated through Kickstarter -- and how many millions of dollars taken from gullible people -- before the company finally acts to implement the kind of simple safeguards that should have been there right from the start?
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but the game is out, and it was fulfilled. independent of this guy, of course.
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