14 DAY TRIAL // The Federal Trade Commission (FTC) took a stance against crowdfunding campaigns for the first time in its history after it investigated and reached a settlement with the creator of a fraudulent Kickstarter campaign.
Back in 2012, Erik Chevalier started a Kickstarter effort for his "The Doom That Came to Atlantic City" project, a monopoly-like board game where players would be able to destroy Atlantic City bit by bit.
More than 1,200 people committed to the project, which managed to raise $122,874 / €110,036, overshooting its initial goal of $35,000 / €31,350.
Things didn't go as planned for the backers, and instead of getting the first copies of the game and various other perks, in June 2013 they were greeted by an announcement from the project's creator saying that he was cancelling the game and promising to return their initial pledges.
Since Kickstarter does not legally offer any guarantee that backers will have their money returned in case a project gets cancelled, everyone was left hanging on Mr. Chevalier's good will. Which he didn't have.
Where and when the FTC comes into play
One of the backers complained to the FTC, which opted to pursue a legal investigation where it found out that not only did Mr. Chevalier not attempt to create the game like he initially told his backers but he actually used the funds on himself.
Most of the Kickstarter money went into his rent, after moving to Oregon, personal equipment, and licenses for a different project.
After the investigation, the FTC reached a settlement with Mr. Chevalier according to which he would not admit guilt, but was "prohibited from making misrepresentations about any crowdfunding campaign and from failing to honor stated refund policies," as by the report.
He must also restrain from using any personal information from his backers and dispose of all their data. Since the defendant does not have the money to refund his Kickstarter backers, the payment is temporarily suspended until he is able to do so.