Washington AG files first crowdfunding consumer protection lawsuit




Here is the PDF of the filing in Washington Court...




I'm glad they're going after what seems like a pretty obvious scam (the campaign had a pretty simple, straightforward set of goals and raised more than enough money to achieve them, yet the artist whose work was to be used was never paid, the supposed manufacturer was never approached to make the cards, the campaign's been silent for almost a year after half a year of excuses before that, etc.); the idea that Kickstarter is a platform for "paying for goods" is problematic enough without also going after the wrong targets. Fraudulent activity is unacceptable, but I feel kind of mixed about what this might mean for the future, though. Kickstarter has always asserted that campaigns had a legal obligation to fulfill the rewards they promised, but until now, unless one of the backers was a lawyer willing to take the issue to court, it was completely unenforceable. Which in many cases is just as well, as I've seen backers mutter about wanting to initiate a lawsuit after a campaign promised - and delivered - "X" but some backers were hoping for "Y" (or some other flavor of "X") and were disappointed with the result. I'm afraid legal action might expand to include campaigns that made good faith efforts to fulfill their promises but failed to do so, even when they were being highly ambitious and were obviously working on projects with no certain outcomes. Kickstarter is being treated by many backers as a pre-order system, but it isn't and it shouldn't be. There's a certain amount of risk involved in Kickstarter, but it should be minimally risky for both backers and for creators. If would-be creators have a personal tragedy or make a mistake that renders them unable to fulfill their promises, they shouldn't be left in a position of being completely legally or financially fucked over.


I would think/hope that the language used in the KS while soliciting backing would come into play here. Many KS funding seekers are pretty much offering a product for sale. They do not say "We will try..." "We intend to..." they say "You will receive 1 THING for $$."


Kickstarter campaigns seem to run the gamut from realistic-sounding business investment to e-begging. It's no suprise that outright fraud has worked its way in also.


I've been frustrated by this myself. I backed a small food campaign and the fundraisers have just been the WORST about communication - long periods of silence, excuses when they do communicate*, and most disheartening of all, attacks on people who have complained about the delays and lack of information. I've written Kickstarter a couple of times, and they've gone from assuring me "we require our fundraisers to fulfill their pledges or return people's money!" to admitting "we really have no way of enforcing this at all." Uh.

  • Amateur hour stuff like "we didn't purchase enough [seasonal produce item] when it was in season so we have to wait until it's in season again to make [item]." Seriously people?


One crowd funding campaign I almost back was a for someone to open up a table top gaming bar. I watched for a year as the owners took expensive trips to gaming conventions around the country doing "research, promotion, and networking." Now that they are a month away from opening they are publicly asking people to barter services with them so they can get the doors open.

From what I have been able to see so far most crowd funding falls into 3 categories. First would be various levels of fraud. Second would be, we don't really need the money but crowd funding is a quick presale that gets attention. Third would be people that have no clue how to actually raise capital and run a business so they beg for money and end up squandering it. The second category of PR/Presale seems to be the most dominant, ie PONO.

Actual legitimate innovative ideas seems to be the vast minority.


Not every presale attempt is an "unnecessary" attempt to get attention. There are real costs to development that a small company may not be able to raise, particularly if the demand is unknown. Many companies when asked "why don't you come out with a new edition of Orcslasher Heroes?" traditionally refused because they didn't know if there was real demand for an issue of an old thing. That's what Kickstarter and the like changed. I'm not sure why anyone would take an "innovative idea" Kickstarter seriously. That's what venture capital is for.


You can do the same thing yourself without paying kickstarter and amazon 10-15%. People do it because Kickstarter campaigns are a buzz now and get coverage and eyes everywhere.


The problem is, that's not really what Kickstarter is for (it's just not designed to work that way), and the expectation that that's what it is carries over even to campaigns that don't use that kind of language or treat it that way. As a result I've seen people litigiously angry when campaigns fulfilled what they promised as rewards, but failed to achieve more ambitious or contingent goals that weren't presented as givens (e.g. Neal Stephenson's "Clang" game). Also, a frequent problem with creative works is that the creators budget such that they're not actually paying themselves living wages while working on the project. So I've seen a number of game campaigns that failed because one person's changed life circumstances meant they needed to quit the project (and take a paying job), leaving the team with insufficient funds to actually hire someone to replace them. Taking legal action would just be kicking them when they were already down...


I was named as a creditor in the bankruptcy of one KS project I backed, and got the court notices, eventually with the 'debt' discharged.

I consider the education I got from following the status updates and comment battles with dissatisfied campaign funders a good value for my investment in donation to the project, once it became clear that receiving (let alone creating/shipping) the physical thing (an iPad hands-free mount that could rotate over a bed) they intended to create was impossible; I believe this campaign was one that KS learned from in its evolution away from 'pre-order' framing.

In particular I came to appreciate and get a deeper understanding of:

  • The disgruntled customers who pursued legal action, or chose not to, and the personality types and pressure it creates on the team.
  • The management issues within the team, and the inability to fix things once past a certain point in spending.
  • The "gee-this-is-harder-than-I-thought" common trope for anyone saying "I think we can do this" re making physical things, hiring Chinese manufacturing, etc.

Some of the campaign rewards I've received have been unsatisfactory, and a few are still pending years later, including a credit in a film that may or may not ever see the light of day. But so long as I stick with "never gamble more than you can afford to lose," I'm OK, and way ahead compared to investing in most startups/small businesses.

But the benefits I've gotten from this form of investment in innovative/local/emerging companies with interesting products have been immense.

I've also backed 54 unsuccessful campaigns (they didn't hit the minimum during the pledge period so never became eligible to collect; a few canceled once they could see the writing on the wall) and find that a great value: zero cost, in some cases a small risk that friend/family will pop up and push it over the line at the last second, a little credit tied up for a short time, in some cases minutes/seconds.


I foresee a Kickstarter campaign to raise the $1.6M for their defense and expenses.


Wow. I just read through that entire comment thread you posted. What a crazy soap opera that project was, especially the creator's bizarre alter ego, "John Shook." It was also a kind of education on how not to do a KS project.


And this thread inspired me to go have a look at the Elemount campaign, which raised a quarter million dollars and is apparently turning into a total shitshow. Fabulous.


Call me cynical but this situation is the exact reason I have never and probably will never contribute to a kickstarter. First of all: irrespective of how dishonestly kickstarter projects advertise themselves, kickstarter itself has always been entirely clear that you're not buying a thing but investing in (hopefully) making a thing into reality and if that is achieved you will get the reward for your backing.

Secondly: c'mon people... if something is a truly great idea, just wait for it to be product you can go out and buy. Your contribution alone will never mean a project reaches fruition, so don't be a sucker and just wait.*

*cue angry kickstarter purists telling me my mentality derails the feasibility of the whole thing.


I'm with you, mate. I guess the whole idea just appeals to a certain type of personality, but it's not mine.

That said, I have backed exactly one KS project thus far. But the creator was someone I knew and trusted personally, and that's about as far as I'm willing to go to crowdfund someone's project.


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