FTC makes history: first settlement with failed Kickstarter

Crowdfunding seekers in the US beware! The long arm of the law has finally caught up with the modern idea of seeking money from the masses. The US Federal Trade Commission has just announced that it has reached a settlement with Erik Chevalier, the man behind "The Doom That Came to Atlantic City", a Kickstarter that was successfully funded in 2012 but was announced canceled in 2013. Failing to refund pledges as promised, the FTC took action on consumer's behalf and imposed some almost light sanctions on Chevalier.

The Doom that Came to Atlantic City was actually fairly modest by some Kickstarter standards. It was a simple board game that asked for only $35,000 but got thrice as much, netting $122,000 from more than a thousand backers by the end of the campaign. Chevalier gave regular updates but in 2013, he announced that the project is being canceled, blaming it on his inexperience in creating a board game, ego conflicts, and legal issues. He then promised to refund backers their money.

It would have been just sad tale if it ended there, but this is where the FTC steps in. According to the agency, Chevalier was unable to make those refunds, despite claiming that he was able to give $2,500 back to the biggest backer. Worse, the FTC alleges that Chevalier used those funds for personal expenses, like paying rent and even licenses for a different project. Needless to say, the Chevalier found himself in very hot water and did what any sane individual without legal recourse would have done: settle.

In fact, he is almost getting a slap on the wrist. Originally, he was given a $111,793.71 fine but, since it was determined he would be unable to pay, it was agreed that it would be suspended, with a warning that the government would collect if they found out he was lying about his financial status. Instead, he will just have to abide with some restrictions. For one, he is not allowed to disclose or benefit in any way from the personal information he gathered from backers. He is also prohibited from misrepresenting any crowdfunding campaign or failing to refund backers should it fail. Yes, he isn't prohibited from giving Kickstarter another go, though his credibility and history might be a big problem.

Crowdfunding is somewhat murky ground. Backers aren't really buying a product and are funding its development. It's more like an investment rather than purchase. That said, they are still consumers and the FTC still has to protect them. And now it has proven that it can to some extent.

VIA: Gamasutra