I had no idea about this guy and his scam but I'm really amazed at how gullible people can be. The whole campaign screams SCAM. If this awful troll-like casing smARtDUINO wasn't enough to give him away, I don't what would actually. Shame that these people can get away with this outrageous stuff like this. Someone should sue him into oblivion and make him pay for all what he had done to unwary people.
I'm curious why the FTC went after this particular Kickstarter. Was it seen as an "easy win" so the FTC could test the waters of going after other Kickstarter scammers? Will this expand outwards to include other crowdfunding sites as well?
I'm always amazed by how quickly some of the popular Kickstarters are overfunded- like the one recently that was basically a complete rip off of Google's Project Ara. Why would someone invest in that? Why would anyone even begin to think that a small no-name company could possibly pull off something like that? Why would someone give them money?
Right, but there's been allegations/evidence of that on dozens of successful crowdfunded projects almost since the beginning of crowdfunding. So I'm curious as to why now? Why this particular project?
I'm guessing that they were easily able to prove that the money went into unrelated projects, rather than "just" being spent wastefully on things related to it. Given that Keith Baker and Lee Moyer (the main game designer and illustrator, respectively) hired a lawyer to try and force Forking Path to give refunds on the project, some of the groundwork was also probably done by the time the FTC stepped in.
Seems like many years ago one of the first kickstarters I invested in, was hugely successful, and the first message from after the group received their money was "After a grueling kickstarter campaign we're taking the team to Thailand to celebrate. This is currently being sent from the beach, and thank you all for making our campaign a huge success."
Why not this particular project? Sometimes the answer is that the first thing is the first thing just because it happens to be first. There doesn't have to be a deeper reason or meaning before it. The government moves slowly, and they didn't have a policy for tackling crowdfunding projects before, or it wasn't on their radar. Well now it is.
Well, apparently this guy actively misrepresented what he was doing and just ran off with the money. Most Kickstarters gone wrong involve amateurs totally underestimating the resources they'll need to achieve something and running out of money before having a product.
Many also get drastically overfunded, and the creators totally go off the rails with grandiose plans, instead of following their original, achievable goals.
The ZPM Espresso project was a great example of both of these. Founders were woefully inexperienced and underestimated the difficulties of manufacturing at every turn. Plus, the fact that they wildly overshot their initial goal meant they were in the worst "middle ground" of manufacturing. They had to worry about much more than just delivering a small number of prototype units, but they also didn't have so much volume that they were getting much discount from manufacturers.
Is there the ability to limit funding in bands to limit this 'middle ground'
ie. if we're funded between a to b we'll deliver a prototype unit, but over b we won't deliver any more until we hit c. Hitting the initial funding goal opens up a stretch goal that is independent (backers are backing the stretch goal, not the initial campaign and won't get rewarded unless it's also hit)
Yep; same, I keep a list of things I'll buy if/when I can just get it through their website. I've seen too many fail to deliver stuff for a couple years now that I'm pretty skeptical of any pre-orders.
The latest thing on my list is the Marbel skateboard. Looks great on paper, all the tech exists, other [small] companies are doing it, but they've had tons of delays and I don't trust that their first products sent out won't have some kinks. I'm not really willing to pay the early adopter fee for a vehicle which could cause me great bodily harm if it malfunctions (e.g. Bluetooth has interference problems or randomly disconnects, which would definitely not be unprecedented in the world of e-skateboards).
I've seen many Kickstarters that have limits on certain rewards. I've never created one so I can't say for sure... but perhaps if you can set all your rewards with limits you could at least keep it from being a runaway. That would at least give you a window and certainly an absolute top end (if all reward levels sell out).
I think smart campaigns, especially for manufacturing projects, should limit funding so that they can work out the kinks in their product, and if they're wrong on cost estimates, they limit their losses. If they're successful, they can always do another kickstarter to ramp up manufacturing.
Seems like the best thing to do then is turn around and find funding (probably by way of debt or equity) to turn the small run into a larger run. Clearly there was some demand, and it's doubtful their whole potential market saw the Kick Starter campaign.
These projects on Kickstarter or Indiegogo platforms quickly gets overfunded because of the huge amounts coming to the projects from shady sources. If you would look at the backers of some of these projects, you will see a lot of big anonymous backings. I have even come across some agencies who will take money from the owners of these projects and put them back with multiple fake accounts to make it seem legit. This is why, even some of the hardware projects asks for a little money like 10,000$, when it is clear that hardware production involves high costs. After quickly getting overfunded, these companies takes advantage of PR and tech articles on popular blogs such as techcrunch, wired, and finally end up attracting a few good-natured tech enthusiasts who get deceived. Some of the projects on these platforms are extremely vague with no prototypes, but still are made to be successfully funded. It is great that finally they will be accountable.
I wonder when someone will start curatig stats to build risk profiles for kickstarter investments.
I wish KS would go back to the days of "we have built something, but we need to do a production run of 10,000 to make the per unit cost low". Everything else is a scam
krowdster.co curates stats about crowd funding. I think it is mainly aimed at people running campaigns, but i think you can get it to make predictions on any campaign if you give it the right inputs about the campaign.
Sadly every time I have ended up at a project that uses Indiegogo it seemed to be projects whom kickstarter wouldn't touch. Are their rules that much different? The most well known one I found there was that solar roadways group.
Could be just what my Twitter most often links me, but I mostly run across really small-scale stuff on Indiegogo, legit but not suitable for Kickstarter because it's not a creative project. For example: someone raising $500 to pay for a trip to present at a conference. This sort of thing seems pretty harmless; either you kick the person $5 or you don't, and you don't expect anything in return either way.
This is actually a standard crowdfunding technique even when it's not from "shady" sources -- you "seed" your campaign with your own money to make it look like it has traction, giving it social proof so other people fund it.
Kickstarter knows people do this but they don't care because they still get their cut.
I hope the FTC doesn't try to enforce consumer laws on an investment site. In the article they even refer to the contributors to the game as "consumers" which I think is a mistake. Anyone contributing to a Kickstarter project is investing and as such has to expect the possibility of a complete loss of funds. Of course, a site like this will attract scammers and the FTC should investigate fishy cases when the principals just take the money and run but that scam is older than capitalism.
The regulations protecting investors are far stronger than those protecting consumers. Crowdfunding could not exist if the customers were legally considered investors.
Yes. There's reasons Kickstarter goes to great pains to make it clear backers are not investors. SEC regulations and compliance requirements are much more burdensome.
It's not an investment site. Kickstarter is very clear that you're not investing. You don't share in profits. You're nothing like an investor. "Kickstarter is not a store" does not make Kickstarter into an investment platform either.
Backers are supporting projects to help them come to life, not to profit financially. Instead, project creators offer rewards to thank backers for their support. Backers of an effort to make a book or film, for example, often get a copy of the finished work. A bigger pledge to a film project might get you into the premiere — or land you a private screening for you and your friends. One artist raised funds to create a wall installation, then gave pieces of it to her backers when the exhibit end."
Backers that support a project on Kickstarter get an inside look at the creative process, and help that project come to life. They also get to choose from a variety of unique rewards offered by the project creator. Rewards vary from project to project, but often include a copy of what is being produced (CD, DVD, book, etc.) or an experience unique to the project.
Project creators keep 100% ownership of their work, and Kickstarter cannot be used to offer equity, financial returns, or to solicit loans."
"Projects can’t fundraise for charity, offer financial incentives, or involve prohibited items.
We’re all in favor of charity and investment, but they’re not permitted on Kickstarter. Projects can’t promise to donate funds raised to a charity or cause, and they can’t offer financial incentives like equity or repayment. We also can’t allow any of these prohibited things."
They are incredibly clear about this. Backing a project on Kickstarter is not an investment.
KS also claims to not be a store. It is disingenuous to try to have it both ways. If KS weren't fraudulent, they would remove the ability to promise rewards that don't exist.
It's the SEC's job to determine that, and writing the rules is taking a long time, which is why title III of the JOBS act, which relates to small-scale equity crowdfunding, has been delayed.
Look, you really don't know what you're talking about here. I'm not saying that to make you feel bad, but to point out that some of your beliefs about how these things work have no basis in fact and you could end up making expensive mistakes if you act on those beliefs.
I understand that it may seem like a distinction without a difference to you, but if you were ever to set up a crowdfunding campaign of your own based on this viewpoint you could run into all sorts of problems.
Patronage probably comes closer to capturing the dynamic than any other word in common use. You're giving money, often with the hope/expectation of receiving some combination of tangible and intangible returns. However, patronage excludes both the idea that you're investing in something with the hope of making a profit and the concept that you're simply initiating a transaction to purchase Y in exchange for $X.
It's neither. What Kickstarter really is is a donations platform. It's like when PBS holds a fundraiser and you get a bag for donating $X to support your local PBS station. (This isn't quite right either, as PBS just buys the bags, if Masterpiece Theater doesn't finish shooting an episode on time it doesn't imperil bag delivery, but it's a lot closer than either of Kickstarter The Store or Kickstarter The Investment Platform.)
I agree, after reading all these comments and links it has to be viewed as charity donations. They need to sever ANY expectation of outcome and can't offer any inducements or incentives or promises to buy, etc. In essence a Kickstarter project says "Here is my project, please give me money" as long as that is clear then the govt may leave it alone but perhaps there are different regs on charities. Also, the IRS might have something to say about the tax status of gifts over $10K, so recipient will have to pay income tax upfront.
Fwiw if they're legally gifts (which is not always obvious, consult your tax professional etc.), gift tax in the U.S. is payable by the gifter, not the recipient: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employ... I believe this is because it's mainly aimed at wealthy estates who're trying to end-run the estate tax by conveying large amounts of money to would-be heirs via gifts instead.
I agree these are questions for a tax pro. Also, I think the gift tax and rules are different for related vs non-related parties. If you pulled $100K in "gifts" from a Kickstarter project I'd bet the IRS would rule that as income, if they haven't already.
When you back a Kickstarter project, you accept the (diclosed) risk that you will not get anything for your money if the project fails. This is the nature of Kickstarter. Otherwise people would just do Amazon preorders like everyone else.
If you don't like this, don't back Kickstarter projects. It doesn't matter that you believe Kickstarter is a shop - you are wrong and the expectations you invent and project onto an organization do not and should not give it legal obligations.
Crowdcube and others like it, they're investment platforms. Kickstarter is ... something else. It's not a shop, because there are no guarantees. It's not investment because there's no profit sharing or part ownership, or even interest.
Kickstarter and especially Indiegogo are so full of scams, it's ridiculous. And people keep funding them. Makes it all the harder for legitimate projects.
I don't think scams as so much as inexperienced people who say "I've been doing this for X years and I can totally do it" then after spending 90% of the money and 6-12 months late - they go "actually....I don't think I can do this". This is also due to the fact that most projects try to do things at cost rather than allocating some buffer.
There was one posted for a bluetooth controller - looked pretty nice and I believe they even had a prototype. When the due date came - excuses start flowing in such as some company in China wanted to charge more than the initial quote for the cases. The owner even claimed it would be too expensive to 3D print them (which I think is a lie - the printer itself is expensive but the amount of filament needed per case wouldn't have been that much). Granted, using a 3D printer probably would have taken another year.
Indeed. It's especially frustrating to see a Kickstarter for something that would literally violate the laws of physics, and at the same time have your own project get misunderstood and rejected on seemingly trivial grounds.
> Chevalier has agreed to a settlement order with agency. Under the agreement, he's prohibited from making misrepresentations about crowdfunding campaigns and failing to honor refund policies in the future. The order also contains a $111,793.71 judgment against Chevaliar, but it is suspended because of his inability to pay. "The full amount will become due immediately if he is found to have misrepresented his financial condition," an FTC press release said. The Post was not able to immediately reach Chevalier, who did not admit guilt as part of the agreement.
So, he only has to promise not to do it again as long as he actually spent all of the money? Surely there is something else they can do to recover these funds.
You can't seize assets someone doesn't have and it's hard to make them acquire assets just to have them seized against their will. I don't know what you're expecting them to do, short of going for criminal charges and locking the guy up.
Violating the order in a previous case can be a separate offense with its own punishment, so a court order that prohibits conduct that is already prohibited by law does have a purpose.
That said, "misrepresentations about crowdfunding campaings" and "failing to honor refund policies" might often be either fraud (in the former case) or breach of contract (in the latter case), but things might fall into either of the first two categories without necessarily meeting the legal standard of either of the last two.
One hopes there's some sort of lien on his future income or so, though I suppose he could declare bankruptcy. This seems like straight-up fraud to me, I don't know why they can't just hand the details over to the DoJ. (Disclaimer: haven't read the FTCs documents, not especially familiar with existing legal standards, just my general impression).
When I saw the headline I wondered whether it was about the Goblins comic game where the game developer basically took the money and disappeared. The web comic artist is trying to make sure that backers get at least the game (edit: maybe?), but he's been hampered by Kickstarter's refusal to let him have the list of backers since he wasn't part of the Kickstarter itself.
I know it pissed him off no end when Kickstarter decided to send his name out to the backers saying "[he's going to get you your stuff]" while still refusing to tell him who the backers were. Not a fine moment there.
Possibly your adblocker is overambitious? I'm mobile right now but it's working in current Firefox, Dolphin and Chrome on Android. Black area is the background for a left side vertical ad, but even with Bluhell Firewall blocking in Firefox the layout is fine.
I'm on Conkeror (basically Firefox) with Adblock. It looks like (to me) that the text doesn't line up with the background image, causing some of the text to instead cover that black bar. Seems odd; you'd think the text and the background would be part of the same div or whatever.
I'm going to say this is definitely an Adblock Plus rules problem. I'm not using it in Firefox (no need with NoScript and RequestPolicy), but I do have the adblockplus.org version in Chrome and get the problem there. Disabling Adblock Plus for the site fixes the display.
I'm not going to dig into it, but I suspect that it's a case of floated divs and Adblock Plus is removing not just the ad or its iframe but the entire div that it's in, thus allowing everything else to move left.
These crowdfunding platforms heavily rely on trust between backers and creators. I wonder how many failed projects, scams, etc. it will take before that trust is eroded? If fraud isn't policed better, Kickstarter will permanently lose many of its best backers.
Example: I once invested in a small Indiegogo art project. The creator was supposed to produce and ship a small book of comic strips to the backers. This was a very doable project but the creator never delivered and has to this day never refunded the backers. I haven't funded anything since and probably never will.
ive always seen this as a problem with crowdfunding, give someone with no business or money management experience and its likely it wont be well managed or ran... which increases the risk of no return on my investment.
I think you're misunderstanding - they went after someone who didn't even attempt the described project, and showed no intent of ever doing so. There's a big difference between an outright scam and someone trying but not really knowing what they're doing.
There is a sea of difference between a project that didn't deliver due to lack of experience (or mental breakdown https://www.kickstarter.com/projects/73258510/sad-pictures-f...) and straight up predatory marketers insinuating themselves into a trust based eco-system. Fact is the majority of the internet is lazy and can't be bothered to do a simple Google search before they hand over their cash (i.e. smARtMAKER)
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[ 3.6 ms ] story [ 149 ms ] threadhttp://kicksucker2013.blogspot.com/2014/09/be-maker-smartmak...
"A fool and his money are soon parted"
I'm always amazed by how quickly some of the popular Kickstarters are overfunded- like the one recently that was basically a complete rip off of Google's Project Ara. Why would someone invest in that? Why would anyone even begin to think that a small no-name company could possibly pull off something like that? Why would someone give them money?
This was the last message from them.
Unless the KS was for a performance art project about gullibility on the Internet.
ie. if we're funded between a to b we'll deliver a prototype unit, but over b we won't deliver any more until we hit c. Hitting the initial funding goal opens up a stretch goal that is independent (backers are backing the stretch goal, not the initial campaign and won't get rewarded unless it's also hit)
I've stopped funding Kickstarters once they're significantly over their goal; I don't think it helps, and I can just buy their product later anyway.
The latest thing on my list is the Marbel skateboard. Looks great on paper, all the tech exists, other [small] companies are doing it, but they've had tons of delays and I don't trust that their first products sent out won't have some kinks. I'm not really willing to pay the early adopter fee for a vehicle which could cause me great bodily harm if it malfunctions (e.g. Bluetooth has interference problems or randomly disconnects, which would definitely not be unprecedented in the world of e-skateboards).
I wonder when someone will start curatig stats to build risk profiles for kickstarter investments.
I wish KS would go back to the days of "we have built something, but we need to do a production run of 10,000 to make the per unit cost low". Everything else is a scam
Kickstarter knows people do this but they don't care because they still get their cut.
"4. Creators keep 100% ownership of their work.
Backers are supporting projects to help them come to life, not to profit financially. Instead, project creators offer rewards to thank backers for their support. Backers of an effort to make a book or film, for example, often get a copy of the finished work. A bigger pledge to a film project might get you into the premiere — or land you a private screening for you and your friends. One artist raised funds to create a wall installation, then gave pieces of it to her backers when the exhibit end."
https://www.kickstarter.com/help/faq/kickstarter+basics?ref=...
"What do backers get in return?
Backers that support a project on Kickstarter get an inside look at the creative process, and help that project come to life. They also get to choose from a variety of unique rewards offered by the project creator. Rewards vary from project to project, but often include a copy of what is being produced (CD, DVD, book, etc.) or an experience unique to the project.
Project creators keep 100% ownership of their work, and Kickstarter cannot be used to offer equity, financial returns, or to solicit loans."
https://www.kickstarter.com/rules?ref=footer
"Projects can’t fundraise for charity, offer financial incentives, or involve prohibited items.
We’re all in favor of charity and investment, but they’re not permitted on Kickstarter. Projects can’t promise to donate funds raised to a charity or cause, and they can’t offer financial incentives like equity or repayment. We also can’t allow any of these prohibited things."
They are incredibly clear about this. Backing a project on Kickstarter is not an investment.
Well, maybe they're both not a store and not an investment platform?
Look, you really don't know what you're talking about here. I'm not saying that to make you feel bad, but to point out that some of your beliefs about how these things work have no basis in fact and you could end up making expensive mistakes if you act on those beliefs.
Try this simple overview of the issue and follow some of the links within to learn about the legal realities of crowdfunding-as-an-investment: http://www.forbes.com/sites/mraneri/2015/04/16/who-needs-equ...
I understand that it may seem like a distinction without a difference to you, but if you were ever to set up a crowdfunding campaign of your own based on this viewpoint you could run into all sorts of problems.
If it were an investment site, you'd be getting shares for your money.
KS used to be a preorder system to fund bulk orders of pre-production invented hardware. Then it became a scam platform.
If you don't like this, don't back Kickstarter projects. It doesn't matter that you believe Kickstarter is a shop - you are wrong and the expectations you invent and project onto an organization do not and should not give it legal obligations.
Crowdcube and others like it, they're investment platforms. Kickstarter is ... something else. It's not a shop, because there are no guarantees. It's not investment because there's no profit sharing or part ownership, or even interest.
So it's... what exactly?
I don't know, but I am wary about it.
There was one posted for a bluetooth controller - looked pretty nice and I believe they even had a prototype. When the due date came - excuses start flowing in such as some company in China wanted to charge more than the initial quote for the cases. The owner even claimed it would be too expensive to 3D print them (which I think is a lie - the printer itself is expensive but the amount of filament needed per case wouldn't have been that much). Granted, using a 3D printer probably would have taken another year.
So, he only has to promise not to do it again as long as he actually spent all of the money? Surely there is something else they can do to recover these funds.
2. If the money is gone, it is gone. The (bad) loophole seems to be that there is no recovery lien against his future earnings.
I may be naive here, but isn't this already illegal? Like, isn't this stuff that you should be doing already?
I would think a more fitting punishment would be to ban him from having anything to do with a crowdfunding campaign, ever.
That said, "misrepresentations about crowdfunding campaings" and "failing to honor refund policies" might often be either fraud (in the former case) or breach of contract (in the latter case), but things might fall into either of the first two categories without necessarily meeting the legal standard of either of the last two.
I know it pissed him off no end when Kickstarter decided to send his name out to the backers saying "[he's going to get you your stuff]" while still refusing to tell him who the backers were. Not a fine moment there.
The comic: http://www.goblinscomic.org/
I believe this is the latest update: http://www.goblinscomic.org/kickstarter-making-the-mafia-loo... in which Kickstarter sent out that promise while linking all those unknown-to-Tarol backers to a page with Tarol's home address.
Updates: added detail link, plus a bit more detail on it.
Wow, that Goblinscomic guy fails at web design 101.
There's a huge black graphical bar in the background with black text that males the left inch of that paragraph unreadable.
I'm not going to dig into it, but I suspect that it's a case of floated divs and Adblock Plus is removing not just the ad or its iframe but the entire div that it's in, thus allowing everything else to move left.
Example: I once invested in a small Indiegogo art project. The creator was supposed to produce and ship a small book of comic strips to the backers. This was a very doable project but the creator never delivered and has to this day never refunded the backers. I haven't funded anything since and probably never will.