The Federal Trade Commission has fined a man more than $100,000 for misleading the backers of a Kickstarter campaign.
The agency said on Thursday it is their first enforcement action involving crowdfunding.
{mosads}Erik Chevalier, according to the FTC’s complaint, marketed a Kickstarter campaign for a board game called The Doom That Came to Atlantic City. To incentivize backers, he offered rewards including pewter figurines related to the game for people who gave more than $75.
But the FTC says that he Chevalier never delivered on his promises, despite offering updates on the progress of the game. Instead, the complaint alleges, he spent the money on personal expenses including rent and moving costs.
Chevalier eventually told his backers that the project had been canceled and said he would refund their money — something the FTC said he never followed through on.
“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,” said Jessica Rich, the director of the agency’s Bureau of Consumer Protection, in a statement. “But consumers should able to trust their money will actually be spent on the project they funded.”
As part of his settlement with the agency, Chevalier has been fined $111,793.71. He will not pay it because he cannot currently afford to. He is also barred from making misrepresentations during other crowdfunding campaigns and is required to obey all stated refund policies.
Crowdfunding has become a lucrative business in recent years. In 2014, $529 million was pledged on Kickstarter alone. But the rise of the crowdfunding model has also led to new questions about how to protect consumers who donate through the platforms and are often promised rewards in return.