FTC Exposes $100,000 Kickstarter CrowdFunding Fraud Posted on August 17, 2015 by Eleanor Smith Defendant Erik Chevalier promised to make a board game called “The Doom That Came to Atlantic City” The Federal Trade Commission (FTC) exposed a crowdfunding fraud by a board game creator that demonstrates the risky business consumers face by supporting crowdfunding. Consumers who choose to donate funds to a stranger’s personal business venture through crowdfunding should note there is little to no legal recourse once financial support is given to a fraudulent person. Defendant Erik Chevalier promised to make a board game called “The Doom That Came to Atlantic City” but later cancelled his project after raising $122,000 dollars — and pocketing all of it. The FTC exposed that Chevalier used almost all of the money he raised on personal expenses. Chevalier’s cancellation – without providing the promised refund – launched the FTC’s investigation, which it filed in the U.S. District Court for the District of Oregon, Portland Division. Giving Money to Strangers Crowdfunding websites like Kickstarter, the site Chevalier chose, allow individuals and businesses to raise money online for a project or venture from numerous people, often strangers. Director of the FTC’s Bureau of Consumer Protection Jessica Rich said, “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.” Chevalier, doing business as The Forking Path Co., sought money from consumers to produce the board game that had allegedly been created by two prominent board game artists. Chevalier made several false representations during his “Doom” campaign for funds. Among these promises, Chevalier pledged that if he raised $35,000, investors would get certain prizes, such as a copy of the game itself or special edition pewter game figurines. Chevalier ended up raising more than $122,000 from 1,246 backers, most of whom pledged large sums of $75 or more in hopes of getting the highly prized board game or special figurine rewards. See Also: Crowdfunding Helps Clients Pay Their Legal Fees Taking Money From Strangers Chevalier gave updates to his crowdfunding supporters on multiple occasions throughout a 14-month time frame that he was making progress on the board game. During this time, however, Chevalier spent most of his money on unrelated personal expenses. In fact, according to the FTC’s complaint, Chevalier spent the Kickstarter.com funds he raised on rent, moving himself to Oregon, personal equipment, and business licenses for an entirely different project. After more than one year of misleading his investors, Chevalier announced he was canceling the project and refunding his backers’ money. When it became clear Chevalier was never going to provide neither the rewards nor the refunds, the Federal Trade Commission became involved. The FTC works to prevent fraudulent, deceptive, and unfair business practices by protecting consumers. The Commission provides information to help spot, stop and avoid fraudulent and deceptive activity. The FTC files a complaint when it has “reason to believe” the law has been violated. Determining a proceeding against Chevalier would be in the public interest, the Commission voted unanimously to authorize its staff to file a complaint and proposed a stipulated order against Chevalier in federal court. However, the disappointed board game backers will not receive their refunds merely because of the FTC’s complaint and settlement order. The FTC ordered Chevalier not to commit any further fraud when participating in future crowdfunding campaigns and to honor all future refund policies. Crowdfunders, Beware While the order does impose a $111,793.71 judgment on Chevalier, it will be suspended due to Chevalier’s inability to pay. Although Chevalier was investigated and exposed by the Federal Trade Commission, he will still be able to crowdfund in the future and keep the tens of thousands of dollars he stole from unwitting strangers. The lesson here is to be careful what choosing to support crowdfunding, which is and likely always will be an inherently risky venture. The case is Federal Trade Commission v. Erik Chevalier, Case 3:15-cv-01029-AC, filed June 10, 2015, in the United States District Court for the District of Oregon Portland Division.