FTC investigates $700,000 crowdfunding campaign for fraud

August 29, 2018

The FTC hasn't publicly investigated crowdfunding fraud outside of one case, but that doesn't mean it's inactive. The Verge has learned that the Commission is investigating Doug Monahan's crowdfunding campaigns for the iBackPack, a smart backpack that included a mobile hotspot, battery pack and connectors. Monahan raised over $700,000 between Indiegogo and Kickstarter in 2015 and 2016, but hasn't shipped the backpack in question. Supporters only ever received pre-release accessories, and the Kickstarter campaign's last news update was in March 2017.

Some supporters have reported that their information had been sold to other crowdfunded companies, and that there had been unexplained battery issues holding things up.

The FTC and Indiegogo declined to comment, although backers have pointed to FTC emails asking supporters if they'd received the iBackPack in the wake of "numerous complaints." Monahan has shut off the website and email address. Kickstarter, however, confirmed to Engadget that it responded to a "civil investigative demand" from the FTC regarding the campaign, and warned that campaigns which don't follow through "expose themselves to legal action." It reiterated a study showing that 9 percent of projects don't ship their products, although the data didn't show how many of these were rip-offs versus production failures.

It's not certain if or when the FTC will formally pursue action against Monahan. The incident does, however, highlight the ongoing risks associated with crowdfunding. Pledges are ultimately investments, not guarantees for shipping products, and your options are still limited if a project goes bust. And that makes regulators' jobs difficult. Investigators can't just take action when people don't get the goods -- they have to show that crowdfunders either planned to deceive backers from the start or willfully abandoned it without telling anyone.

Source: The Verge

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