Washington Files First Consumer Protection Lawsuit Over Kickstarter Fraud

An anonymous reader writes "In 2012, a card game called Asylum was successfully funded on Kickstarter. Two months later, its expected delivery date came and passed without a product. In July 2013, the company behind the game stopped communicating with backers. Now, the Washington state Attorney General has filed a consumer protection lawsuit against the makers. This is the first time a project from a crowdfunding site has been the target of such a lawsuit. The AG said, 'Consumers need to be aware that crowdfunding is not without risk. This lawsuit sends a clear message to people seeking the public's money: Washington state will not tolerate crowdfunding theft. The Attorney General's Office will hold those accountable who don't play by the rules.' Here's the legal document (PDF)."

Comments

So....

[ArcadeNut]

The system is working the way it should?

Good.

Re:So....

[Noishkel]

Well the fact you don't have scammers bilking people right left should be an indicator that it is working fine as is. Although on the outside this also looks like a legit case for a lawsuit too.

Which way is the wind blowing today?

[kwbauer]

So is this a case of too much government involvement in "open source" things or is this a case of the government is a bit late and should have prevented this situation from happening in the first place?

Re:Which way is the wind blowing today?

[dnavid]

So is this a case of too much government involvement in "open source" things or is this a case of the government is a bit late and should have prevented this situation from happening in the first place?

In my opinion neither. The government has no specific interest in deciding how people choose to invest their money, provided those investments are not explicitly fraudulent. But they do have an obligation to police illegal fraud. Kickstarter projects can fail: that is the risk investors take as investors. But if the people running the project do not make a good-faith effort to produce what they have asserted they can produce for their investors, that's a crime. I would say going dark on your investors for almost a year strongly suggests no good faith effort is being made to complete the project.

Re:Which way is the wind blowing today?

[QuasiSteve]

Neither?

This has nothing to with open source, not even when put into quotes.

Kickstarter has made it abundantly clear that you are not investing, and while it likes to still suggest that you're just throwing money at people and any perks offered are just that, perks, their own guidelines make very clear that if the project is successful, the creators have a contractual obligation to deliver. Of course, Kickstarter itself doesn't get involved - they just offer the platform and take their percentage of the cut. They even responded to a website with a generic 'Kickstarter has hosted umpteenthousands of successful projects - gee whizz I sure hope it works out for everybody involved' (I'll dig up source if need be.).

It's also not the government being too late. This isn't the first lawsuit against a Kickstarter project creator. It is, however, the first one being started by a government entity on consumer protection grounds, rather than just between a backer and the project creator on contract grounds. There isn't really any threshold for 'too soon' or 'too late' in this - the AG here just felt an itch, and now they're scratching it, and in the process sending a message: even if backers end up just throwing their hands in the air because a $20 pledge per individual is not worth even walking to the courthouse to those individuals, the AG might take notice if the totals are thousands of dollars and hundreds of people essentially getting duped.

Re:Which way is the wind blowing today?

[Anonymous Coward]

The amount of content on the project page is a bit much for a basic scam.

My gut is that the project failed catastrophically somehow and rather than own up to it, this Nash guy just decided to let it sit there and maybe go away on its own.

Personally I think this lawsuit is a good thing. A reminder to backers that these projects don't always turn out, and a reminder to posters that they are getting real money from real people and even though it's an "investment" they do still have obligations.

Re:Which way is the wind blowing today?

[sjames]

The sad part is that it looks like there is enough there that he could have actually completed the deck, even if the quality wasn't really up to the hype it should have been good enough to stay out of legal trouble.

Re:Which way is the wind blowing today?

[Anonymous Coward]

The argument of whether there's too much or too little government in anything does occur in other cultures outside America. But I find that in America, it too often becomes the main focus whenever there's a political discussion, distracting from what needs to be done. Also see 'socialism,' 'liberal agenda,' 'democracy,' 'freedom fries' and other such nonsense.

How about we focus on actual policies and not ideology?

Re:Which way is the wind blowing today?

[Meeni]

What about a case of the government coming at the right time, after the fact so as not to stifle innovation, but before the problem has grown like a monstrous chancre ?

Re:Which way is the wind blowing today?

[thegarbz]

He has $25000 you could pay a graphic designer 3 months wages, and get a company to print a first shipment with that.

Plus apparently the person running the kickstart campaign IS the designer. The fact he can't deliver something so simple with that much cash just reeks of fraud. That combined with the fact that kickstarter is supposed to kick-start a project. It doesn't need to be profitable before the campaign has finished.

Either the person running the campaign doesn't get it, or actually gets it very well and is enjoying a nice holiday somewhere nice with the money he ripped off others.

Interesting

[Arethereanyleft]

Glad to hear it. Too many Kickstarter projects have screwed over their backers. Sure, you can play the "investment" card, but there are still several projects where the creators shipped a few units and then just disappeared. It's one thing to fail to create, but yet another just to keep the goods for yourself.

Re:Interesting

[sjames]

Sure, you can play the "investment" card,

Actually, this guy can't seem to come up with cards to play :-)

No John Campbell?

[Anonymous Coward]

If there's anyone who needs a lawsuit for defrauding customers, it's John Campbell and the downright hostile conclusion of his Sad Pictures for Children Kickstarter promises. The man's an outright con artist with narcissistic personality disorder.

Judge for yourselves selves: https://www.kickstarter.com/projects/73258510/sad-pictures-for-children/posts/759318

Re:No John Campbell?

[Anonymous Coward]

That whole thing was just sad.

I don't know what the truth is, maybe it is all a con. Personally I got the impression that it started legit, he screwed up the financials on an epic level, then went into his weak anti-money diatribe (or whatever the hell that is) to avoid admitting it (probably even to himself). He wouldn't be the first person to suddenly develop a "capitalism is a lie and you are all idiots for following it" mindset after failing epically at it.

It's definitely clear that he suffers from some kind of mental issues.

Re:No John Campbell?

[Nidi62]

I don't know what the truth is, maybe it is all a con. Personally I got the impression that it started legit, he screwed up the financials on an epic level.

I don't know...the fact that he got 2 people to basically pay $300 each so he could go to the doctor and dentist seems more like a con than anything else to me. That, and the tier of $500 for a stick-figure portrait.

Re:No John Campbell?

[Boronx]

This is the thing that gets me about Kickstarter. Some guy who once design a great game goes on Kickstarter to fund a sequel. He ends up with $2 million dollars. Who the hell knows if he can manage the money? Nobody knows. He could have the best of intentions, but simply spend the money foolishly and end up broke with a half-finished product.

Re:No John Campbell?

[im_thatoneguy]

On the up-side a half-finished product still meets the minimum requirements if he puts it on a server for download.

Judging the economy of a large scale (or even small scale) operation is hard. Tons of projects go over budget. In the case of kickstarter if you go over budget you're kind of screwed since you can't later raise the price. It's extremely easy to underestimate expenses when you haven't done it before.

Then again the honorable thing to do is to go back to your supporters and go "look I fucked up, I thought I had the price set in stone but then I forgot to account for payroll taxes. Please send an extra 10%. If someone did that for me on a project and it was actually an honest mistake (or so I thought) I would be willing to send a few extra bucks.

Ultimately though I do have a problem with companies that are attempting to profit by putting people at extreme risk financially. I know from running a rental company over this last year that I probably spend 30% more than what I would expect and I'm a spreadsheet junkie who loves strategizing these sorts of business plans. Without any experience these companies are taking advantage of people who are almost undoubtedly going to lose money with starry eyed dreams of success in order to fuel their own advancement. Kickstarter is going to take their fee even if the project doesn't deliver. There are other crowd sourced endeavors where the company brags about how you can get things directly from people for less--and when I look at the expenses I know come tax season/the first time their equipment needs repairs/time to rotate the tires etc that the reason these services are so cheap is because people who aren't professional ____ will underbid. They'll realize they didn't have a grasp on the finances and then quit and another sucker will take their place.

Re:No John Campbell?

[Anrego]

The thing about crowd funding as an alternative to traditional funding is that banks and investors are very good at recognizing that a product is going to fail. The crowd funding community is very early in developing that same sense, but I think it will come.

The interesting thing is that one of the big appeals to crowd funding is it allows ideas to become a reality that would never have passed through the risk-averse traditional funding routes.

Eventually I hope a middle ground will form, comprised of a more savvy average backer, a little more diligence on the part of kickstarter (maybe via some kind of rating/analysis done on projects over a certain size?), but still with some of the same spirit of throwing money at stuff because it sounds cool and you really want it to happen vice because you've got some pretty charts and a pile of math showing it'll be profitable.

Re:No John Campbell?

[Dutch Gun]

The thing about crowd funding as an alternative to traditional funding is that banks and investors are very good at recognizing that a product is going to fail. The crowd funding community is very early in developing that same sense, but I think it will come.

The interesting thing is that one of the big appeals to crowd funding is it allows ideas to become a reality that would never have passed through the risk-averse traditional funding routes.

Eventually I hope a middle ground will form, comprised of a more savvy average backer, a little more diligence on the part of kickstarter (maybe via some kind of rating/analysis done on projects over a certain size?), but still with some of the same spirit of throwing money at stuff because it sounds cool and you really want it to happen vice because you've got some pretty charts and a pile of math showing it'll be profitable.

Yeah, banks don't offer small business loans until you've been in business for several years and have an income (gross, I think) of several hundred thousand dollars, which shouldn't be too surprising, but that's a pretty high bar for most small projects.

Make no mistake, crowdfunded projects are absolutely high-risk ventures, or they'd be getting funding from more traditional sources. Financing a project from start to finish with only crowd funding is especially risky, especially if the developers don't have an established track record. It's extremely easy to underestimate how much time and effort it takes to bring a project to fruition. I've been a game developer for 15 years, and it's taken me much of that time to be able to properly estimate a development project (and I still occasionally get things badly wrong). And of course, there's the risk of outright failure from fraudulent or extremely incompetent developers.

I'm not really sure what sort of "middle ground" would work, though it's an interesting idea. Maybe a company (Kickstarter, 3rd party?) could offer a service to vet potential projects for a fee and present their findings to potential funders. Things they could investigate:

* Experience of developers with similar projects
* Result of previous crowdfunding efforts
* Financial history and stability of developers (e.g. credit rating)
* History / stability of development team
* Quality of development plan
* Current project completion
* Overall subjective impression

As you mentioned, this would probably be most appropriate for teams trying to raise larger sums of money, where more is at stake.

Re:No John Campbell?

[im_thatoneguy]

Which is somewhat my point. Even experience developers will estimate wrong. Without a financial backstop a developer might think it will cost $100k, but actually costs $170k. Normally a publisher either eats their losses and cancels the project if it's $75k in and needs another $75k or else they up their investment in the project.

Kickstarter is great because you can get funding. It's fundamentally flawed because you are legally obligated to meet a deadline that even experienced developers miss a significant non-zero portion of the time. Kickstarter certainly has the potential to financially ruin people. If you are legally obligated to finish and finishing ends up costing twice what you budgeted then instead of just cancelling the project and your investors taking a hit--your investors can sue you to finish the project even beyond their investment. So what often happens is someone out of humiliation and threat works for another year for free and gives away a product that costs them money for every unit. Which again happens in the regular industry but often is diluted with other hits.

Nobody is a 100% hit machine. Nobody makes 100% of their deadlines and estimates. Instead of having flexibility to adapt as time goes on it seems like Kickstarter either showers success or ruinous failure on its kickstarter campaigns by its very design.

Nice.

[pregister]

Man, that looks like a pretty cool game! How can I contribute?

Re:Nice.

[Mashiki]

Send a cheque, along with your bank account into to:

Sirus lyscrwme
123 Maple Street
Anytown USA.

Kickstart is dumb

[Boronx]

Nerds who knowingly paid for game that did not exist upset that game does not exist and go running to big government instead of wising up.

Re:Kickstart is dumb

[Anguirel]

I don't think anyone went running. This looks more like the Ass't Attorney General went fishing for a case (something about asking around for anyone that had a KickStarter fail to deliver) and happened to find one that he could prosecute. Probably just testing the waters for cases of this nature, and looking to establish himself with a high-profile case at the same time.

Oculus Rift?

[DigiShaman]

And what of Oculus now that they sold out to Facebook? If I actually contributed to it, I would be royally pissed by now!

Re:Oculus Rift?

[rochrist]

Oculus delivered their kickstarter rewards.

Re:John Campbell

[Anrego]

Maybe he's pulling a really good con, but from what I can tell the dude legitimately tried, failed hard, then had a complete and total mental breakdown. His final rantings seem those of a man who finally snapped under stress and created a fantasy world in his head to cope with it.

If they can even find the guy, he's probably flat broke anyway.

In the meantime...

[mutherhacker]

...big financial criminals roam free! Way to go state attorney!

Sue Politicians for not keeping their promises?

[RealGene]

I'm still waiting for the prez to make good on his net-neutrality pledge, not to mention closing the prison at Guantanamo Bay...