A Free Public Srvice

SCAMS BULLETIN Host Jay White is an inactive attorney in San Mateo County, California.

February 7, 2023

                                    CROWDFUNDING SCAMS

Attribution: California Attorney General

Crowdfunding is the practice of funding a project or new idea or business by raising money from a large number of people.

It is often done through online platforms, such as Kickstarter, Indiegogo, GoFundMe, and YouCaring.

Online crowdfunding sites are not always safe from fraud.

“Organizers” will pitch a new product or creative project and submit it to an online platform. Crowdfunding sites can also be used to help people in need, such as raise money to pay for funeral or medical bills.

Tips on Evaluating Crowdfunding Campaigns:

Learn all you can about the organizer before making a contribution. Use Google and LinkedIn to look up the organizer. Does the organizer have the expertise in the area the campaign concerns? Check out their Facebook page. Does it look fake? Are the friends real? Are there real-time comments? Be suspicious of pages that were created right before the campaign started.

Research the Crowdfunding Platforms.

 There are many different crowdfunding platforms and they all have different rules. Some platforms require organizers to have a prototype and only give the organizers money if the campaign reaches its goals and after the campaign is over. Others do not require a prototype and allow organizers to take out money at any time, even if they do not reach their goals. If you want a refund, you have to get it from the organizer. Some platforms also provide refunds in certain situations (that is, when the organizer makes false statements or is charged with a crime).

Do a Reverse Image Search.

Fake campaigns often copy and paste other people’s stories or photos. Doing a reverse image search of the photos used in the campaign, as well as those used on the organizer’s social media pages, can show you if the photos are stolen. Also, be careful if the campaign is posted on multiple sites. Scammers will do this to reach more people. A reverse image search may also show that the supposedly “new” product already exists and is being sold in another country like China through Alibaba.com.

Contact the Organizer and Ask Questions.

Each crowdfunding site allows you to ask the organizer questions through the comments section. If an organizer is answering questions regularly, it is more likely that they are not trying to scam you.

Be Suspicious.

 Beware of campaigns that make you feel sorry for someone, but do not give you any details of how your money will be used. Be extra careful after a major disaster or tragedy because scammers will often try to take advantage of your desire to help victims.

Understand the Purpose of Crowdfunding.

Remember that there is no guarantee that the crowdfunded campaign will be successful. The purpose of crowdfunding is to fund a company or project, not to buy a product. There are risks involved. Similarly, when donating to a worthy cause, contributions are probably not tax deductible unless they are made to a nonprofit organization.

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