Will the FTC Regulate Crowdfunding?

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Ever thought about using crowdfunding to complete a project?

If so, take note: The penalty for soliciting funds and then failing to ship a project could be worse than a lot of irate customers—the Federal Trade Commission (FTC) might come after you.

The FTC has leveled a judgment against one Erik Chevalier, who raised $122,000 through Kickstarter for a board game, The Doom That Came to Atlantic City, which he never produced. In a press release, the agency claimed that Chevalier instead spent the funds on rent, personal equipment, and “licenses for a different project.”

There’s just one catch: The FTC’s judgment is suspended because Chevalier is broke. “The full amount will become due immediately if he is found to have misrepresented his financial condition,” the press release added, but that might prove cold comfort to whomever contributed money to the project.

According to the Washington Post, another company stepped in to release the game, although some of the original backers missed out on the rewards promised by Chevalier’s Kickstarter campaign.

In recent years, a lot of tech pros have turned to Kickstarter and other crowdfunding sites in order to fund games, apps, hardware, and other products. While many of these projects receive full funding, and a few have become blockbuster successes, a sizable percentage failed to make their goals. Although the crowd seems generally forgiving of projects that just don’t make the goal, it’s quick to anger when a fully-funded project doesn’t deliver.

It remains to be seen whether the FTC will broadly police crowdfunding sites. If the agency decides to do so, it will behoove anyone starting a crowdfunding campaign to keep close tabs on how they spend any money they collect—and to devote it all to the project.

Image Credit: Kickstarter

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