How Kickstarter can scam you

After backing a successful Kickstarter project, but not seeing the product in development, LIRON SEGEV believes he may have been the victim of a Kickstarter scam – one where small amounts of money are taken from thousands of backers, and nothing is seen in return.

Kickstarter, a crowdfunding platform where ideas come to life as businesses, individuals, innovators, artists and designers places its projects online and appeals to the general public to fund their dreams. To date, over 58 000 projects have been funded with $1,042,733,365 total dollars pledged to Kickstarter projects. There are various options for funding, starting at just $1 and increasing. Each funded-amount comes with varying perks where the more one pledges the more perks there are. The project and funds will only start should the project reach its expressed goal. If it falls short of the amounts required, it will be scrapped and no funds will be deducted from the backer’s accounts. Should the project succeed in reaching the stated goal, then the project is deemed as a success and the money is transferred from the backer’s account to the project owner.

At end of 2013 I backed a a project. This project was successful and the money was deducted from my account. It is now 4 months later and the product has still not been developed and the only communication I have is several bulk messages saying that there were issued with the production which have caused delays.

This got me thinking.

I have allowed a stranger to take money from me based on a promise of delivering something in the future. This is just like the 411 scams that send out spam offering products/ money/ services and all you have to do is deposit a small “administration fee” into their account.

I have a sinking feeling that I was taken for a ride and I wondered what recourse I have and who I have that recourse against.

The Kickstarter thinking

Kickstarter is a highly reputable organisation and has helped many companies reach their goal. However, Kickstarter is just the gateway to raise funds. It takes 5% of the fees raised and that is where their responsibility stops. Kickstarter has made this very clear in their Frequently Asked Questions:

Who is responsible for completing a project as promised?

It’s the project creator’s responsibility to complete their project. Kickstarter is not involved in the development of the projects themselves.

Kickstarter does not guarantee projects or investigate a creator’s ability to complete their project. On Kickstarter, backers (you!) ultimately decide the validity and worthiness of a project by whether they decide to fund it.

Once the project is a go, then all transactions are conducted between the backer and the project owner.

Kickstarter does offer some verification of the project owner, and the only protection that Kickstarter offers the backers is in the form of this statement:

Kickstarter’s Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill. (This is what creators see before they launch.) This information can serve as a basis for legal recourse if a creator doesn’t fulfill their promises. We hope that backers will consider using this provision only in cases where they feel that a creator has not made a good faith effort to complete the project and fulfill.

This lead me to asking:

Could Kickstarter be used to scam people on fake projects?

The answer seems to be YES.

Anyone is able to create a project on Kickstarter as long as you qualify with these very minimalistic requirements and don’t violate the Project rules which Kickstarter lists (full list here) and the rest is up to the project creator. Some of the notable no-nos are :

So if you are a crafty entrepreneur of the dodgy kind, you can get a sample unit of some products, dress it up as your own with some creative videos and background stories and then convince people to fund you. Once you reach your goal, as long as you seem to be acting in good faith to complete the project, you are safe. It is highly unlikely that someone who pledged $10 from South Africa is going to sue you in the US and so you get to keep the cash. So in this respect it is just like the 411 scam – take small amounts from lots of people.

Kickstarter known scams:

There are several high profile cases of scammers who used Kickstarter to raise funds for their bogus projects. Some notable examples are:

Free Roll Machines Gamers Dice (https://www.kickstarter.com/projects/75321040/free-roll-machined-gamers-dice/)

This project was cancelled on the 25th February 2013 after Kickstarter community members realised something was not right in what was being promised. They called out the project owner in the public comment section to the point that he could not defend the project.

Similar case was with the LED Strip (https://www.kickstarter.com/projects/bc26/ambiolight-a-one-touch-room-makeover)

This product was seen as a repacked strip of LED lights that was commonly found in the marketplace as imported products from China using Alibaba.com

In both these cases the project owners would have netted a nice sum of money for very little work.

However, these figures are a fraction of the massive scam that with minutes to spare was suspended on Kickstarter which nearly saw the project owner net over $120 000!

The scam was for the 100% Japanese Kobe Beef Jerky (https://www.kickstarter.com/projects/kobered/kobe-red-100-japanese-beer-fed-kobe-beef-jerky)

In this scam, the project owner only wanted to raise $2 374 but managed to get $120 309 (that is over R1.2 million!) This scam was exposed with a combination of user comments and finally with the investigation of a film documentary done by Kickstarted which worked out that something was not right.

So in summary:

I am sure there are a lot of scams that were successful and have gone unreported. We know that when we receive an e-mail saying we won a car or a cash amount or great-aunty-Mildred left us millions in her estate, we simply ignore those mails. However, when projects are listed on a reputable platform such as Kickstarter our guard is down. We want to be part of this new “thing” and we want to be able to say “I got this THING as a funder” and so we get taken in by the fancy visuals, backstory of the inventors and the amazing video. We somehow take solace in knowing that our money is safely handled by Amazon who will only release the money if the project is successful so it must be safe.

The reason for this post is not to say do not back Kickstarter project, but rather to understand that there is a risk. Just as with all things Internet, you need to use your brain and take a second look at the project beyond all the fancy surroundings.

Read the comments. Are people being answered? Are the answers to questions satisfactory? are people generally happy with backing the project? Download the images that are used and run them against Google Image checker and see if they have been used elsewhere. Research the project owner and their company to make sure they are legit.

Finally, ask yourself the question: If a stranger came to your office and offered you a piece of this project, would you hand over money to back it? This is exactly what Kickstarter is. A stranger asking for money for a project.

* Follow Liron Segev, aka The Techie Guy, on his blog at thetechieguy.com, or on Twitter at @Liron_Segev