Crowdsourcing Rip-Offs

Scams
1

I’ve backed several crowdsourcing campaigns over the last few years with mixed results. I’ve invested in successful campaigns, failed campaigns, one where the creator unfortunately passed away and then there’s the non-delivery think-I’ve-been-scammed ones.

Of the latter category, in January 2013 I backed the “GCW Zero” (https://www.kickstarter.com/projects/gcw/gcw-zero-open-source-gaming-handheld) for about $150 AUD. This was successfully funded for $238,000 USD of about a $130,000 USD goal.

My biggest concern however, was in May 2016 I backed the “13.3 Inch E-Reader” (https://www.indiegogo.com/projects/13-3-android-e-reader) for $1,066 AUD. This was also successfully funded, at $369,00 USD of a goal around $110,000 USD.

I thought the E-Reader was a safe-ish bet as the product already existed and the campaigner already had a working unit and needed a certain number ordered in order to get a viable production run.

To date, I have received neither of these items. In both cases the campaigners post updates promising that they will be “shipping soon” before ceasing updates altogether. It’s not like they ship nothing, many backers do receive their products (my guess would be around 50% for both campaigns) but that also leaves a lot of people out of pocket.

Dozens of comments on the funding pages get ignored and eventually the campaigner seems to disappear completely.

Both Kickstarter and Indiegogo make it clear that only the campaign owner is responsible for fulfilment of pledges and that they are unable to provide any sort of guarantee or refund.

To add insult to injury, both of these items have become available to buy through third parties online while the original backers who helped make these items a reality end up empty handed.

At this stage, I don’t really want either item. After waiting this long the tech has moved on and there are better options available. I would, however, really like to be refunded at least some of the money.

I’m not sure if there is any recourse for those of us without the products we paid for. The campaigns were located in the USA and Canada and I have no idea how to chase up these people. Is there anything that can be done to recover these funds, or is it viable to look into joining with the other unfulfilled backers in some sort of international class-action to recover some of the funds?

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2

You have met the world of venture capitalists where the vultures reign supreme. As a general rule any money anyone puts into crowd funding or direct investments in a startup or fund raising effort has to be considered at risk of total loss.

Regarding the venture capitalists, had a go with them a few decades ago in the early days of the internet. They would have been happy to buy in for a pittance in return for 90% of the shares. We original owners would have shared the remaining 10%. Many small entrepreneurs in need of cash will go for it rather than lose it all. We lost it all as Yahoo (etc) had corporate funding and left us in the dust so we were seriously under capitalised to compete.

Then there is the patent problem. If the inventor did not have it covered Very Well and also had the capacity to proactively protect it in the courts s/he is as ‘damaged’ as yourself while the copy cats go into production of the same or a close enough product.

An international suit might make sense if you have a few $10 millions in play, but for a few tens of thousands across many parties I suggest you look at the legal realities and costs. Silks only take sure things (or close enough) on contingency, if they win and are able to collect they get 30-50% action dependent, and the plaintiffs share the remainder.

Not legal advice, but I think you are going to write off your experiences as education.

I have been a party to a few securities class actions in the USA having lost in the $10,000’s in each case because of management malfeasance. The most my share has ever been was about $500, and more often $10-50, if that makes a point.

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3

I would go further than that.

Not legal or financial advice, but I think you are going to write off your experiences. Period.

If you back something at the startup phase, it is inherently highly risky. You should not put in money that you cannot afford to lose 100% of.

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4

This is what I suspected, but was hoping not to hear. I always considered these things risky and the loss of this money is not devastating to my financial situation, but it does annoy the hell out of me.

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5

Last year, the Commonwealth government introduced legislation to specifically regulate crowd funding investments within Australia…

https://asic.gov.au/regulatory-resources/financial-services/crowd-sourced-funding/

This legislation was introduced as a result of many individuals investing/providing funds for a particular funding campaign without understanding the risks and also without sufficient information to make an informed decision.

I suspect that there are thousands like yourself in Australia who have also been burnt from crowd funding campaigns, either because they were run by unscrupulous individuals or promises were not fulfilled.

Moneysmart.gov.au also has investor information on their website in relation to crowd funding…

Up until the recent legislative changes, placing money into crowd funding was a little like Russian roulette, where it was a gamble if one would see any money/a product again.

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Indeed - venture capitalists seem like just cashed up lawyers, accountants and criminals - but I repeat myself, thrice … :rofl:

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7

I look at those crowd funding things as I do poker machines or betting on the ponies (neither of which I do)… its gambling. If you cant afford to lose it, just dont. I feel for you, Ian… but you will not see those dollars again, I fear.

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