The United States Federal Trade Commission has announced the settling of its first complaint against a crowdfunded project, a 2012 Kickstarter campaign that raised more than $100,000 without issuing rewards or refunds.
Boardgame project The Doom That Came to Atlantic City promised "a light hearted Lovecraftian game of urban destruction, for two to four players," from Lee Moyer, Keith Baker and Paul Komoda. It closed its funding period on June 6, 2012, with $122,874 from 1,246 backers, an average pledge of nearly $100.
Over the next year, according to the FTC, project manager Erik Chevalier (as The Forking Path, Co.) spent most of that money on "unrelated personal expenses such as rent, moving himself to Oregon, personal equipment, and licenses for a different project," issuing none of the promised rewards to backers. Fourteen months after Doom was successfully funded, Chevalier announced that the project was cancelled and he would be issuing refunds to backers. According to the FTC's complaint, "few, if any, [backers] received a refund." The game's creators would go on to collaborate with boardgame publisher Cryptozoic Entertainment, who provided a "print and play" edition for backers and later a fully produced version.
The FTC felt that Chevalier's actions represented a violation of federal law regarding consumer protection, and that issuing a complaint against him would be in the public interest. Today, they announced that he had settled. From the FTC.gov post:
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.
The complaint against Chevalier (link directs to a PDF) falls under an FTC initiative known as FinTech, an effort to protect consumers with particular focus on "new and emerging financial technology," which presumably includes the still very young field of online crowdsourcing. "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 able to trust their money will actually be spent on the project they funded," said Jessica Rich, director of the Bureau of Consumer Protection.
Kickstarter provided this statement to Polygon regarding the FTC announcement:
Kickstarter has empowered millions of people to be part of the development and production of new creative works. Kickstarter creators have an incredible track record when it comes to following through on their promises. But creators who abuse our system and backers' trust expose themselves to legal action. That another creator stepped in to produce this game and get it into the hands of backers is a testament to the goodwill and spirit of the Kickstarter community.