The FTC’s mission is to protect consumers from false or misleading advertising, and as part of its new FinTech program the agency is developing new strategies for curbing deceptive practices online. Target #1: The Doom That Came to Atlantic City, a crowdfunded vaporware boardgame that netted more than $122,000 for its would-be creator.
Anyone planning to start a Kickstarter campaign might want to consider what the FTC found wrong with this failed campaign and the penalties imposed in the resulting settlement. And if you’re wondering what this case could mean for the future, the FTC is hosting a Twitter chat with its attorneys today (Thursday, June 11) from 2-3pm.
Here’s the scoop from the FTC’s press release:
In its first case involving crowdfunding, the Federal Trade Commission has taken legal action against the deceptive tactics of a project creator who raised money from consumers to produce a board game through a Kickstarter campaign, but instead used most of the funds on himself. The defendant has agreed to a settlement that prohibits him from deceptive representations related to any crowdfunding campaigns in the future and requires him to honor any stated refund policy….
According to the FTC’s complaint, Chevalier represented in his Doom campaign on Kickstarter.com that if he raised $35,000, backers would get certain rewards, such as a copy of the game or specially designed pewter game figurines. He raised more than $122,000 from 1,246 backers, most of whom pledged $75 or more in the hopes of getting the highly prized figurines. He represented in a number of updates that he was making progress on the game. But after 14 months, Chevalier announced that he was canceling the project and refunding his backers’ money.
Despite Chevalier’s promises he did not provide the rewards, nor did he provide refunds to his backers. In fact, according to the FTC’s complaint, Chevalier spent most of the money on unrelated personal expenses such as rent, moving himself to Oregon, personal equipment, and licenses for a different project.
Under the settlement order, Chevalier is prohibited from making misrepresentations about any crowdfunding campaign and from failing to honor stated refund policies. He is also barred from disclosing or otherwise benefiting from customers’ personal information, and failing to dispose of such information properly. The order imposes a $111,793.71 judgment that will be suspended due to Chevalier’s inability to pay. The full amount will become due immediately if he is found to have misrepresented his financial condition.
This case is part of the FTC’s ongoing work to protect consumers taking advantage of new and emerging financial technology, also known as FinTech. As technological advances expand the ways consumers can store, share, and spend money, the FTC is working to keep consumers protected while encouraging innovation for consumers’ benefit.