FTC Takes Aim At Fraudulent Kickstarter Projects

The Federal Trade Commission has left its stamp on the crowdfunding scene by taking legal action against Erik Chevalier, the Kickstarter project creator who raised more than $122,000 funds from 1,246 backers to produce a board game called The Doom That Came to Atlantic City. In the end, it was the backers who were doomed, as the project was cancelled without any refunds.

Chevalier, who was also doing business as The Forking Path Co., issued a number of updates on the Kickstarter project saying that progress was being made. After 14 months, however, he announced that the project was cancelled and that he would refund money to the game's backers. It turned out to be an empty promise. Instead, the FTC said Chevalier spent the bulk of the funds raised on unrelated personal expenses like rent, costs associated with relocating to Oregon, personal equipment, and even licenses for an entirely different project.

The Doom That Came to Atlantic City

“Many consumers enjoy the opportunity to take part in the development of a product or service through crowdfunding, and they generally know there’s some uncertainty involved in helping start something new,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “But consumers should be able to trust their money will actually be spent on the project they funded.”

Unfortunately for those seeking justice, Chevalier's punishment amounts to a slap on the wrist. As part of a settlement agreement with Chevalier, he's prohibited from making misrepresentations about any crowdfunding campaign and failing to abide by stated refund policies. He was also hit with a $111,792.71 judgment, but it's been suspended due to his inability to pay. If it's found that he misrepresented his financial status, then the full amount would be due right away.

On the bright side, this is the FTC's first case involving crowdfunding, and though Chevalier is no worse for wear, it could still serve as a warning to others who might to game the system.