SCAMS BULLETIN Host Jay White is a volunteer attorney who assists low income seniors in San Mateo County, California.

CROWDFUNDING SCAMS

May 22, 2019

Crowdfunding is one way to support a project you believe in and get rewards. But the project you’re backing is only as good as the people behind it. Some dishonest people can take your money but produce nothing – no product, no project, and no reward.

Here’s how crowdfunding works: People called “creators” ask for small amounts of money from lots of people. The purported purpose is to fund projects through websites like Kickstarter or Indiegogo. In exchange, creators offer rewards—possibly a product the creators plan to create in the future. Sounds great–unless the creators don’t create anything but profit for themselves.

In an FTC lawsuit against iBackPack, the FTC says people shelled out over $800,000 via crowdfunding campaigns. The company said those funds would help it provide consumers with backpacks and shoulder bags with built-in batteries for charging mobile devices. But, according to the FTC, iBackPack’s claims that bags would soon be going out to consumers were lies.

What’s more, the FTC’s investigation found that the money the creators took in from their campaigns generally didn’t go toward what they said it would. Instead, iBackPack’s CEO pocketed a large part of the funds for his own personal use.

When contributors began to complain about iBackPack’s failure to perform as promised, the CEO allegedly threatened some of them – adding that he knew their addresses and other personal information.

If you’re thinking about contributing to a crowdfunding campaign, take time to research the creator’s background and reviews before you pay. For example, has the creator engaged in previous campaigns? How did those campaigns turn out?

If you learn about a crowdfunding scam you are urged to report it to the Federal Trade Commission: www.ftc.gov.