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First FTC Case Involving Crowdfunding Project

First FTC Case Involving Crowdfunding Project - The Beacon


By: Jackie

First FTC Case Involving Crowdfunding Project

The Federal Trade Commission (FTC) has filed suit against the creator of a crowdfunding campaign. Your BBB® has learned from an FTC Press Release that the suit was against Erik Chevalier and his business, The Forking Path Co., for using “deceptive tactics.” Chevalier, the defendant, was said to have used the crowdfunding site, Kickstarter, to raise money from consumers to produce a board game but spent most of the money on himself.

The FTC, in the Press Release, defines crowdfunding as involving “individuals and businesses funding a project or venture by raising funds from numerous people, often via dedicated online platforms.”

According to the Press Release, the defendant solicited money to produce a board game called The Doom That Came to Atlantic City that had been created by two prominent board game artists. Chevalier told consumers that “if he raised $35,000, backers would get certain rewards, such as a copy of the game or specially designed pewter game figurines.” $122,000 was raised from 1,246 backers, and Chevalier sent out updates that he was making progress. However, he cancelled the project after 14 months and said he would refund his backers’ money.

The Press Release further states that Chevalier provided neither the rewards nor the refunds, and actually used most of the money on “personal expenses such as rent, moving himself to Oregon, personal equipment, and licenses for a different project.”

Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, stated in the Press Release, “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. But consumers should be able to trust their money will actually be spent on the project they funded.”

According to the settlement order, Chevalier is

*prohibited from making misrepresentations about any crowdfunding campaign,

*prohibited from failing to honor stated refund policies,

*barred from disclosing or otherwise benefiting from customers’ personal information,

*barred from failing to dispose of consumers’ personal information properly,

*ordered to pay an $111,793 judgment which was suspended due to his inability to pay.

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While the BBB endeavors to provide accurate information to the public, changes in the law, facts or circumstances may have occurred since the foregoing was posted. The BBB recommends doing independent research and consulting professional advisors concerning a particular situation.

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Jackie is the Operations and Education Foundation Assistant with the BBB. She assists consumers with business inquiries, and does presentations to senior groups and high school students. She is a regular contributor to the blog.