Creator Behind Crowd-Funded Boardgame That Failed To Materialize Draws Settlement Agreement From FTC

from the and-all-cries-of-'force-majeure'-were-for-naught dept

Screwing backers of crowdfunded projects may no longer be as free from consequence as it used to. The Federal Trade Commission has (finally, some might say) decided to tackle a failed Kickstarter and hold the person behind it responsible (sort of) for walking away from a dead project with over $100,000 in backers' cash.

Erik Chevalier, d/b/a The Forking Path, hit Kickstarter with a plan for a boardgame featuring "Lovecraftian urban destruction" and a goal of $35,000. By the time the clock wound down, Chevalier was sitting on $123,000 of what would turn out to be mostly donations. That was June of 2012. By July of 2013, after numerous delays and long silences, Chevalier announced the project's demise. He also promised to start refunding backers. Apparently, only the first assertion was true. In fact, a lot of what was said to backers proved to be untrue. From the FTC complaint:

In an update issued on July 23, 2013, Defendant stated that the project was being cancelled because “the intention was to start a board game company with the Kickstarter funds” and that “[a]fter 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.”

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.

More recently, Defendant promised consumers that he would provide an accounting of his expenses, but he has not done so. Consumers continue to file complaints regarding Defendant’s failure to provide the promised products and rewards, or refunds.

Eventually, after numerous complaints from the backers and the artistic creators of the game, another game developer stepped in and published the game and gave all backers a copy of the board game but not the other, highly-prized deliverables, such as the promised pewter figurines.

To date, Defendant has neither provided the promised reward deliverables nor refunded most of the consumers.
Chevalier's settlement agreement with the FTC is mostly toothless. It concedes he doesn't have the funds to pay back the $112,000 he still owes backers, thus suspending this route of recourse. The other wording in the agreement simply orders him to not being a lying swindler while utilizing crowdfunding services. In other words, behave like a normal, decent human being. Why it takes a government agency to deliver this message is beyond me, especially when it could have ordered him to steer clear of these services entirely.
IT IS ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all others in active concert or participation with any of them who receive actual notice of this Order, whether acting directly or indirectly, in connection with any crowdfunding campaign, are permanently restrained and enjoined from misrepresenting or assisting others in misrepresenting, expressly or by implication:

A. the purposes for which funds raised from consumers will be used;
B. that by making a contribution, consumers will receive a specific good, service, or other reward deliverable;
C. the performance, efficacy, nature, or central characteristics of such good, service, or other reward deliverable; or
D. the qualifications or expertise of any person associated with the crowdfunding campaign.

IT IS ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all others in active concert or participation with any of them who receive actual notice ofthis Order, whether acting directly or indirectly, in connection with any crowdfunding campaign, are permanently restrained and enjoined from failing to honor any stated refund, cancellation, exchange, or repurchase policy.
Coupled with this are some more stringent stipulations, including the FTC's monitoring of Chevalier's crowdfunding-related activity for the next 18 years, as well as giving the agency permission to pounce on any assets it deems "hidden" for the purposes of repaying Kickstarter backers.

An additional layer of scrutiny for crowdfunding ventures is probably a good idea, but not every funded project that dies is necessarily the result of the formative entity taking the money and running. It will be tempting to believe this is true in every case, especially if leaning on the FTC proves more effective than relying on self-policing and crowdfunding platforms Terms of Service agreements. As it stands now, there aren't many effective legal routes to demanding refunds for undelivered projects, and that has proven to be a bit of a problem, albeit far less frequently than cautionary notes to potential backers would have you believe.

If the FTC is going to regulate this like any other "trade," the deterrents will have to be a bit stronger than the terms of this settlement. The agreement with Chevalier may ward off future fraudulent attempts by him and his company, but it doesn't seem likely to scare off others who see crowdfunding as a path to quick personal enrichment.



Filed Under: boardgame, crowdfunding, erik chevalier, failed projects, ftc
Companies: kickstarter


Reader Comments

Subscribe: RSS

View by: Time | Thread


  • icon
    Get off my cyber-lawn! (profile), 12 Jun 2015 @ 3:15pm

    STOP

    or I'll say stop again!

    reply to this | link to this | view in chronology ]

  • This comment has been flagged by the community. Click here to show it
    identicon
    Simplicity, 12 Jun 2015 @ 3:17pm

    SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

    As ever, THE major question isn't even vaguely mentioned! Minion writes "a failed Kickstarter" and that's it, no blame at all.

    BUT IN JUST THIS ONE SCAM KICKSTARTER GOT 13,500 DOLLARS FOR NO MORE THAN WEB-SITE AND MONEY TRANSFERS, WITHOUT LEAST CHECKING OR INSURANCE.

    The only way to clean up Kickstarter is to toss its officers into jail and talk to them a few months later when they're ready to deal. Right now, they get money with ZERO responsibility. Are multi-level scams "free enterprise"? "Innovation"? -- No, but it's the "new business model" that Moocher Masnick wants. -- He runs Kickstarter promos every Saturday.

    reply to this | link to this | view in chronology ]

    • identicon
      Simplicity., 12 Jun 2015 @ 3:19pm

      Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

      Whoops: 12,300 by the given figger. -- WHO CARES, THOUGH? It's totally undeserved for what little Kickstarter does.

      reply to this | link to this | view in chronology ]

    • This comment has been flagged by the community. Click here to show it
      identicon
      Anonymous Coward, 12 Jun 2015 @ 3:22pm

      Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

      Whoops. 12,300. -- Second correction: Techdirt blocked the first, wouldn't let me post again 30 seconds after...

      reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 12 Jun 2015 @ 3:36pm

      Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

      Right now, they get money with ZERO responsibility.

      Which is no different to stockbrokers, there is never any guarantee that patronage or investment will pay, unless you are a large corporation who can get the government, that is tax payers, to carry all the risks.

      reply to this | link to this | view in chronology ]

    • icon
      Dan (profile), 12 Jun 2015 @ 3:40pm

      Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

      What criminal law have Kickstarter's officers broken, which you think justifies tossing them in jail? You're exactly right--they provide a website and money transfers. What legal, much less criminal, obligation is there for them to provide more?

      The service is really very similar to eBay. When eBay was younger, they didn't provide any checking or insurance either. In fact, they still don't provide any checking, but they do now offer limited insurance. They decided to do so voluntarily because they thought it was good for business (and I agree), not because they were legally required to.

      Kickstarter provides a legal service, and gets paid for it. It seems you don't like the service they provide. That's the beauty of a (semi-) free market--you don't have to do business with them if you don't want to. And if you think you can do it better, you're free to try. But where do you get the idea that you (or the government) can force them to provide a service they aren't interested in providing)

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 12 Jun 2015 @ 5:16pm

        Re: Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

        I think the point is that even if a failed project does refund backers, the refund can, at best, be only 90c to the dollar as kickstarter has the other 10c. And in cases where there is no money left for repayment then if kickstarter refunded their cut then there would at least be a nominal 10c in the dollar refund.

        reply to this | link to this | view in chronology ]

    • icon
      Dan (profile), 12 Jun 2015 @ 3:41pm

      Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

      Oh, and yes, there is blame placed, just not on Kickstarter itself. The article (quite correctly, IMO) places the blame squarely on Erik Chevalier.

      reply to this | link to this | view in chronology ]

      • icon
        That One Guy (profile), 12 Jun 2015 @ 4:22pm

        Re: Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

        Quite. It's like if someone wrote an article about someone performing hit-and-runs, and someone comes across angry that there was no mention of the company who made the vehicle. It's not mentioned because it doesn't matter, the one performing the actions is relevant, who made the tool they used to do it isn't.

        reply to this | link to this | view in chronology ]

        • identicon
          Anonymous Coward, 13 Jun 2015 @ 9:15pm

          Re: Re: Re: SO HOW AFFECTS KICKSTARTER WHICH RAKES TEN PERCENT OFF THE TOP?

          Well it does matter as Kickstarter has 10c in the dollar to repay to people.

          reply to this | link to this | view in chronology ]

  • identicon
    kallethen, 12 Jun 2015 @ 5:47pm

    If the FTC is going to regulate this like any other "trade," the deterrents will have to be a bit stronger than the terms of this settlement. The agreement with Chevalier may ward off future fraudulent attempts by him and his company, but it doesn't seem likely to scare off others who see crowdfunding as a path to quick personal enrichment.


    My guess is that the value of this settlement is that it sets some precedence for future endeavors to punish those who scam via Kickstarter.

    reply to this | link to this | view in chronology ]

    • icon
      nasch (profile), 12 Jun 2015 @ 6:27pm

      Re:

      My guess is that the value of this settlement is that it sets some precedence for future endeavors to punish those who scam via Kickstarter.

      You call this punishment?

      reply to this | link to this | view in chronology ]

  • icon
    Monday (profile), 13 Jun 2015 @ 10:16am

    KickStarter

    I had not actually heard of this until today. It makes me happy that Start-up supporters will have this back-up plan in their corner. I have a KickStarter page drawn up, but it has not "gone live", because I'm exhausting every possible source I can (and I haven't given up yet).
    The way I see it is Start-up Funding is a very fragile privilege, and the slightest, smallest bump, will scare off anyone who wants to help, but won't because of this example.
    When it gets right down to it, Chevalier's crowdfunding still doesn't get payed back, and that's going to hurt some real innovators and 'visioneers'.
    What is confusing, and perhaps I skimmed right past it, is that all of the Funders should have been given the same amount of detail and planning (that is provable), and substantiated before these funding drives start. For example, a Business Plan, a Marketing Plan, Letters of Reference, Goals and Plans, and the levels of successes achieved so far towards those goals, and why this is at KickStarter in the first place. Nevertheless, he's still called a Fraud and that's gonna scare off backers, but it will increase the amount of due diligence and research needed to protect future backers. I applaud the Gov's efforts, or lack thereof, to get this "lying swindler" to do right, but a few months in jail would have taught him a lesson or two. IT WAS FRAUD and THEFT! and not the nice kind we all saw from Wall Street Bankers and Investment Houses in 2007 thru 2009. 2010, the news atarted taking breaks from reporting stuff, 'cuz they were gonna get away with it...
    In the end, it's not KickStarter's fault, they were just starting out (like it's already been said) and I'm sure their long hard look at themselves' will fix, if not already fixed, these kinds of loopholes. If I had contributed, it would have only been after seeing any and all data this thief should have been able to provide from the start - and not the rent receipts, or the lease on his new car - I'm sure it's there... you can always cancel a payment if you think you've been ripped off.

    Great post. Thanks 'n' Cheers :)

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 13 Jun 2015 @ 1:28pm

    Kickstarter as overseer

    Kickstarter could easily implement fairly simple changes that would go a long way toward protecting project backers, but chooses not to.

    For instance, instead of just blindly turning over the money collected into the project founder's grubby pockets, Kickstarter could keep control of the account until project completion and require that owners use the money to pay for only those expenses directly related to the project, with online itemization (and additional statements) detailing every withdrawal from this sort of "bank account" in order to discourage the co-mingling of business and personal funds.

    While most people are basically honest and hard-working, the crowd-funding industry needs to operate from the premise that there will always be a few bad apples, ranging from the grossly incompetant to the criminal-minded types looking for a an easy way to rob and swindle.

    The big question is, how many sinkholes and scams will be perpetrated through Kickstarter -- and how many millions of dollars taken from gullible people -- before the company finally acts to implement the kind of simple safeguards that should have been there right from the start?

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 15 Jun 2015 @ 4:41am

    so, this game is out. seems the rest of the group who made it (it was done before the kickstarter, this was just to publish / print) had no idea this guy was going to do this, and was burned too.

    but the game is out, and it was fulfilled. independent of this guy, of course.

    reply to this | link to this | view in chronology ]

  • icon
    M. Alan Thomas II (profile), 15 Jun 2015 @ 8:38pm

    The value is not on what the order says on its face but in how it alters any subsequent proceedings by the FTC against him. The FTC essentially has a blank check to audit his entire life at will for nearly two decades, and any action they take against him can be railroaded so hard it will make civil asset forfeiture look like due process. To put it another way: This is 18 years of probation with a probation officer who has permission to rifle through the guy's bank account any time he feels like it and take any money he doesn't think the guy really needs.

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here



Subscribe to the Techdirt Daily newsletter




Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Close

Add A Reply

Have a Techdirt Account? Sign in now. Want one? Register here



Subscribe to the Techdirt Daily newsletter




Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Follow Techdirt
Special Affiliate Offer

Advertisement
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Advertisement
Report this ad  |  Hide Techdirt ads
Recent Stories
Advertisement
Report this ad  |  Hide Techdirt ads

Close

Email This

This feature is only available to registered users. Register or sign in to use it.