FTC Pursues Kickstarter Board Game In First Crowdfunding Case

[Fanghawk]

FTC Pursues Kickstarter Board Game In First Crowdfunding Case

The Doom That Came To Atlantic City is the first Kickstarter to face an FTC enforcement action - showing that the agency is finally addressing crowdfunding cases.

We live in a world where indie developers can turn to crowdfunding sites like Kickstarter to support their ideas, and <a href=http://www.escapistmagazine.com/news/view/116809-Wasteland-2-Kickstarter-Ends-With-a-Bang>in many cases that's been <a href=http://www.escapistmagazine.com/articles/view/video-games/editorials/reviews/13681-Pillars-of-Eternity-Review>a fantastic thing. But it remains a new field that hasn't quite figured out how to respond when things go wrong, prompting the Federal Trade Commission to finally get involved. The FTC has launched its first enforcement action against a crowdfunded project - <a href=http://www.escapistmagazine.com/news/view/126293-Board-Game-Kickstarter-Canceled-Amidst-Claims-of-Malfeasance>The Doom That Came To Atlantic City - for failing to provide refunds to backers.

The Doom That Came To Atlantic City first launched its campaign in 2012, proposing a tabletop game where players sent Lovecraftian monsters on a massive rampage. The project raised $122,874 - 350 percent over the original goal - but as of July 2013 the budget had run dry. "After paying to form the company, for the miniature statues, moving back to Portland, getting software licenses and hiring artists to do things like rule book design and art conforming the money was approaching a point of no return," game founder Erik Chevalier wrote at the time. "My hope now is to eventually refund everyone fully."

But today, an FTC complaint alleges that very few backers actually received their refunds. In fact, the complaint goes a step further to claim Chevalier spent the Kickstarter money on himself instead of supporting the game's development. "In reality, Defendant never hired artists for the board game and instead used the consumers' funds for miscellaneous personal equipment, rent for a personal residence, and licenses for a separate project," the complaint reads.

As it stands, Chevalier has agreed to a settlement with the FTC that prevents him from making misrepresentations about crowdfunding campaigns and failing to honor refunds in the future. The settlement order also includes a $111,793.71 judgement, which has been suspended until Chevalier's financial situation changes.

That all said, perhaps the biggest detail here is that the FTC is finally willing to get involved with crowdfunding disputes. Considering that The Doom That Came To Atlantic City <a href=http://www.escapistmagazine.com/news/view/137540-Neal-Stephensons-Kickstarted-CLANG-Gone-for-Good>wouldn't be the first game to fold after collecting backer funds, expect to see more cases like this in the future.

Source: Washington Post

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[Albino Boo]

Any possible criminal investigation would have to be completed first, followed by a decision about criminal prosecution. The actual case would have come in front on the FTC some time ago and is only now getting to the point of settlement.

Would like to reiterate, unless there is some evidence of wrongdoing and the budget runs out you get nothing. In this case there appears to be evidence of money not being spent on what it was said to be spent but if the project goes over budget and collapses then thats it. The whole point of a limited liability company is all the liabilities remain in the company and if there is no money left you cannot recover money from the owners without proof of wrongdoing

 

[CaitSeith]

Remember, kids! When you give money in a Kickstarter, you aren't giving it to a project. You are giving it to a person who hopefully will use it to make the project.

 

[esserin]

Any possible criminal investigation would have to be completed first, followed by a decision about criminal prosecution. The actual case would have come in front on the FTC some time ago and is only now getting to the point of settlement.

Would like to reiterate, unless there is some evidence of wrongdoing and the budget runs out you get nothing. In this case there appears to be evidence of money not being spent on what it was said to be spent but if the project goes over budget and collapses then thats it. The whole point of a limited liability company is all the liabilities remain in the company and if there is no money left you cannot recover money from the owners without proof of wrongdoing

I've read about this case. It's known that when he moved back to Portland, he used the money to buy himself a house there. He himself never even worked on the game. He was supposed to manage the financial aspect of the business (including the kickstarter) while the game designers produced the game.

And the designers? They say they never saw a dime of the kickstarter money for the game. He just called them one day to say that they're wasn't any money left and promptly hung up. Fortunately, they were saved by the boardgame company cryptozoic entertainment, who were willing to fund and produce the game with the actual game designers while they pursued the con-artist.

 

[Strazdas]

Would like to reiterate, unless there is some evidence of wrongdoing and the budget runs out you get nothing. In this case there appears to be evidence of money not being spent on what it was said to be spent but if the project goes over budget and collapses then thats it. The whole point of a limited liability company is all the liabilities remain in the company and if there is no money left you cannot recover money from the owners without proof of wrongdoing

Wouldnt the claimed use of money for personal accomodation and licensing for other projects instead on the game be proof of wrongdoing (assuming the claim is correct of course)?

Remember, kids! When you give money in a Kickstarter, you aren't giving it to a project. You are giving it to a person who hopefully will use it to make the project.

I treat kickstarted as donation. Im donating money to somone so he could be making something. Kickstarters rules does not allow it to be treated as an investment.

 

[Albino Boo]

Wouldn't the claimed use of money for personal accommodation and licensing for other projects instead on the game be proof of wrongdoing (assuming the claim is correct of course)?

I was talking in the general case rather the particular case. If someone makes a genuine mistake then there is no recourse.

In this particular case there appears to be insufficient evidence of fraud to mount a criminal case but enough to mount a case under civil law which the FTC uses. However the FTC verdict does not help an individual to recover any money, in many ways it makes less likely. The US government will be the senior creditor, so paying the fine will come first, followed by any secured debt, then the unsecured debt and finally you. Even then you would have go to court and obtain a civil judgment and then pursue the money. After the FTC fine I doubt there will be much left of the guys assets, so again you get nothing.

 

[Strazdas]

I was talking in the general case rather the particular case. If someone makes a genuine mistake then there is no recourse.

In this particular case there appears to be insufficient evidence of fraud to mount a criminal case but enough to mount a case under civil law which the FTC uses. However the FTC verdict does not help an individual to recover any money, in many ways it makes less likely. The US government will be the senior creditor, so paying the fine will come first, followed by any secured debt, then the unsecured debt and finally you. Even then you would have go to court and obtain a civil judgment and then pursue the money. After the FTC fine I doubt there will be much left of the guys assets, so again you get nothing.

Fair enough, yeah limited liability offers certain protections in these cases.

Interesting, maybe laws in US differ than here. Heree the kickstarter "investors" would come before debts in the payment line. I dont think its so much about getting money back as about punishing people who tried to scam the system here though. at least thats how i see it.

 

[CaitSeith]

Would like to reiterate, unless there is some evidence of wrongdoing and the budget runs out you get nothing. In this case there appears to be evidence of money not being spent on what it was said to be spent but if the project goes over budget and collapses then thats it. The whole point of a limited liability company is all the liabilities remain in the company and if there is no money left you cannot recover money from the owners without proof of wrongdoing

Wouldnt the claimed use of money for personal accomodation and licensing for other projects instead on the game be proof of wrongdoing (assuming the claim is correct of course)?

Remember, kids! When you give money in a Kickstarter, you aren't giving it to a project. You are giving it to a person who hopefully will use it to make the project.

I treat kickstarted as donation. Im donating money to somone so he could be making something. Kickstarters rules does not allow it to be treated as an investment.

I never said it was an investment. Even when you donate, you're trusting that person won't just run away with all the money.

 

[Torchiest]

I'm not a fan of government in general of the FTC in particular, but enforcing the law in cases of fraud is exactly appropriate. This is one of the few things the FTC should be doing to protect consumer and property rights. Good on them. I hope this prevents more fraudsters from trying to jump on the easy money bandwagon.

 

[Baldr]

Any possible criminal investigation would have to be completed first, followed by a decision about criminal prosecution. The actual case would have come in front on the FTC some time ago and is only now getting to the point of settlement.

Would like to reiterate, unless there is some evidence of wrongdoing and the budget runs out you get nothing. In this case there appears to be evidence of money not being spent on what it was said to be spent but if the project goes over budget and collapses then thats it. The whole point of a limited liability company is all the liabilities remain in the company and if there is no money left you cannot recover money from the owners without proof of wrongdoing

Erik Chevalier was the sole proprietor of his company(sorta meaning his company and personal assets/debts are the same). He took the steps to register his working name as "The Forking Path Co." He probably should have gone the extra steps and actually registered a real LLC. That way he could separate the company assets from his personal assets. Especially with over $100,000. Then again a LLC is not going to protect fully against fraud and using those company assets as personal assets.