A man raised $122,000 in crowdfunding to create a fantasy board game and ended up using the money on himself, involving for the first time the Federal Trade Commission, who want to protect investors from situations like this in the future.
Eric Chevalier launched a Kickstarter campaign
to raise money on a board game he wanted to produce called “The Doom That Came to Atlantic City.” Kickstarter is the very influential online funding site that raises contributions for independent creative projects from netizens.
Chevalier launched his campaign in 2012, originally asking for $35,000 to build the “light hearted Lovecraftian game of urban destruction.” At first, he regularly reached out to investors to ensure them he was making progress. He promised that those who pledged $75 or more would get rewards like a copy of the game or specially designed pewter figurines.
Investors liked the idea of the game, and those involved in creating it, including two well-known board game artists, so much that Chevalier was able to raise much more money than he asked for. He raised an astounding $122,000 from 1,246 backers, according to The Federal Trade Commission
Fourteen months later, Chevalier suddenly cancelled the project, writing in an update, “Every possible mistake was made, some due to my inexperience in board game publishing, others due to ego conflicts, legal issues and technical complications […] I did walk into a situation that was beyond my abilities.”
He promised to refund investors’ money, but instead, the FTC claims he used the money on himself, spending most of it to move to Oregon and to pay for his rent, among other things.
The FTC then took action and accused Chevalier of running a fraudulent Kickstarter campaign. Chevalier has now agreed to a settlement in which he is required to pay $111,793.71.
This is the first-ever legal enforcement by the FTC against a crowdfunded project. Crowdfunding campaigns can be an easy way to raise money, but they can also be used to dupe investors into providing money that is instead used for personal purposes rather than on what was promised or intended.
Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said:
“Many consumers enjoy the opportunity to take part in the development of a product or service through crowdfunding, and they generally know there’s some uncertainty involved in helping start something new. But consumers should be able to trust their money will actually be spent on the project they funded.”
The settlement, however, was supposed to set a precedent. Instead, it barely registered and is a blow to Chevalier’s investors because the FTC has agreed to suspend the penalty due to the fact that Chevalier claims that he has no money. The FTC said:
“The full amount will become due immediately if he is found to have misrepresented his financial condition.”
Shockingly, Chevalier isn’t even banned from crowdfunding future projects. He has only been barred from making crowdfunding misrepresentations and to return all investments on any future projects he fails to deliver on.
The Chevalier case means that the FTC will become more involved in protecting those who pledge money in crowdfunding projects. The fact that Chevalier is off the hook in paying restitution, however, means to many investors that any legal action taken by the FTC in regard to crowdfunding scams may fail to adequately protect them.