Kickstarter and its ilk can be brilliantly useful tools for groups and individuals with great ideas to get their ideas funded and produced. The benefits of which are many. One, as a creator, you don’t have to peel away percentages of ownership in order to be funded, with the right coverage, free marketing and of course, an immediate anticipation of your products release by your initial investors. Investors receive some formidable benefits as well, early access to products, updates on production and of course, the ability to say that you helped bring a great idea/product to fruition. Unfortunately, the fact that absolutely anyone can create an account, setup a campaign page and accept donations without any background check from the crowd funding source offers up several ways for investors to get scammed out of their money. Out of the hundreds, (if not thousands) of campaigns that are currently out there, very few have been discovered to be scams, but it is a danger we all must recognize. Chris Morran, in a Jan. 31, 2013 Consumerist post on the topic said “The projects looking for crowd-sourced funds on Kickstarter range from the absurd to the brilliant, but a few of them are just plain scams”. Today we bring you a list of 7 crowd funding campaigns that have left their investors without the intended product or compensation.
After watching the video made by GXP Technologies, it’s easy to see how investors of LUCI, the Advanced Lucid Dream Inducer would be excited to have a chance at taking control of their dreams. If this thing came to fruition, it wouldn’t have been long until someone came up with a product to network our unconscious minds together into something akin to what we saw in The Thirteenth Floor.
The project’s Updates Page tells a story that is as painful as it is swift. In the early pages, GXP’s language is friendly, uplifting and above all, grateful. Nine days into the campaign GTX posted the following,
“This morning, we busted the $100,000 in funding! So thank you everybody for your wonderful support. Many people are asking us if we plan to put stretch goals. We prefer not to promise anything in the form of stretch goals. We rather make the simple promise that more funds will allow us to create a better and more refined product in the end”
GXP continued to receive pledges and continued to tell investors that pledged $150 CAD or more that they would receive a production model of the device once manufacturing was completed. Unfortunately this was never to happen. After receiving a whopping $363,302 CAD in pledged funding, the project was abruptly cancelled and those that had invested were left with a message telling them that GXP had found funding elsewhere and would offer $150 discounts to the newly financed product slated to cost $299. Obviously, Investors were angry, and many have left their opinions to be read in the comments section of the Campaign page. GXP still states that they are in fact going to release a Lucid Dreaming Product sometime in February of this year, but seeing how quickly their demeanor changed during the crowdfunding campaign, I wouldn’t expect much from them. If you still think that investing in Dreams, some say that Aurora is a project more likely to make dreaming lucidly a nightly experience, but please remember that you aren’t pre-ordering a product but are in fact, investing in the people behind the project.
2. Crypteks USB
This is one piece of vapor-ware I was really looking forward to. Do I have any specific need for a USB drive enclosed in a Cryptex and hardcoded with 256bit AES encryption? No, but damn if I didn’t want one! Crypteks’ funding page was very believable. The hardware required didn’t require millions of dollars to research and produce, the CEO himself was in the video, and the pledge returns were quite fair. Investing $130 would land an investor an 8GB memory stick, $160 a 16GB model and $200 or more would get an investor a black 16GB model. A bit pricy for the amount of memory offered, but let’s be honest, if you were investing in Crypteks, you weren’t in it for the storage capacity, but to be able to play with your thumb drive and show off its capabilities.
This campaign kicked off in 2011 and received over $190,000 in funding. So what happened? Well, it turns out that the product, company and its founder were a sham from the start. After the end of the funding campaign, Fahad Koumaiha began to post updates less and less frequently before completely going silent. Investors posted daily to the comments page requesting updates to be met with the deafening silence of being conned. Now, almost three years later, investors are still awaiting refunds that were “promised” to them and Fahad has moved on to his next “project”, a Bitmining Solution called FrostBit. A little research will tell anyone with even minor knowledge of PC hardware and its capabilities that FrostBit is very unlikely to be able to fulfil its listed capabilities.
3. Kobe Red Beef Jerky
Before I end up destroying all of your faith in Crowdfunding, I’d like to tell you a brief story in how a scammer was stopped before defrauding those who placed their hopes and paychecks into their hands. Magnus Fun Inc., (now deleted on Kickstarter) created a Kickstarter page for the product Kobe Red, a supposed beef jerky made from 100% Japanese Beer fed Kobe Cows. The scam was quite well setup. There were comments posted on the funding page stating they’d thoroughly enjoyed the jerky at their uncle’s ranch, another stating they’d gotten a sample at a local event, all of these accounts stated they’d previously invested in other projects. A more through search, however would end with the conclusion that each project they’d funded was defunct.
Although over 3,000 people visited the page and pressed the fund button, few noticed the clues that made this fraud so blatant. For one, the founders were completely absent from the video, nor was any personal information about them available. In fact, this scam might have gone off without a hitch if not for the Documentarians behind the film “Kickstarted”. The documentarians noticed that there was a disparity between the cost of production and the pledge amounts requested in the campaign page. The documentarian team then reached out to Magnus Fun to film a couple of interview shots and were replied with a promise to send footage to them from a taste test in California. Of course, this was never to happen. Eventually, this information got back to Kickstarter and only moments before Magnus Fun Inc. was scheduled to receive the pledge funds, Kickstarter pulled the plug. The Kickstarter account Magnus Fun was deleted and those behind it disappeared.
4. Silver Hallow Mechanical Watches
This one here… this one should give you a laugh. I can absolutely hear what was going through this fraudster’s mind while attempting to justify their actions. “If they’re too lazy/stupid to lookup alternatives to this, then they deserve to lose their cash”. I can’t say I agree with them, but… you know what, I think I do agree with them on this one. Personally, I’ve grown too kindhearted in my old age to scam someone out of their money, hard earned or not. I do, however feel that the internet has provided a means to lookup, research and learn about anything you have a curiosity for. I would think that if someone was choosing to hand over money, of any amount, to some stranger, especially online, they’d have the sense to do a bit of Googling first.
In the case of JMK ESS Watch Co., a James Knudson of Fort Pierce, FL created a Kickstarter campaign to fund his “high end, fully mechanical(no batteries)top quality timepieces for men.” His story was that he had been making watches in Switzerland for many years and had decided that he wanted to make his “own name known to the world”. He went to say that the risk in his campaign was minimal as he already had 200 of these hand crafted watches ready to ship and had parts for a further 300. Everything looked kosher on first sight. He showed himself with the product in his home-made low-res video, he was able to display several different models and even had some very clear images of the watches dispersed throughout the page.
Little did James know that those very images would be the nail in his proverbial coffin. Someone on Reddit was wise enough to run a few of those images through a reverse image search like TinEye and found that those very same images were being used to sell the same models of watches on AliExpress.com for $29.60 per pair. Odd considering that James was offering his “handmade” timepieces for $100 a piece or $175 for a pair. Someone went ahead and did the right thing by contacting Kickstarter and the Campaign was swiftly suspended before James got his lying hands on the money of the susceptible.
5. Susan Wilson’s STEM Camp Fund
Some people think this one was a scam, others don’t. I’m not quite sure myself, but I definitely believe there was some tom-foolery going on somewhere. Mackenzie Wilson, daughter of Susan Wilson, had the admirable desire to attend STEM camp so that she could learn to make her RPG video game. Quite commendable, don’t cha think? Her mother then helped her create a Kickstarter campaign with an $829 funding goal in which Mackenzie had a video describing the game she wanted to make and why she was asking for investors. The story was so heartwarming, that over 1,000 people pledged their funds and Mackenzie’s campaign ended with over $24,000. Happy story, happy ending, right? Uhhh, not completely…
This is where it gets murky in some eyes. A user, or users, on Reddit did their required due diligence and found out that Susan Wilson, the mother of Mackenzie, was a Harvard Business School Graduate and had been previously named one of the most powerful women entrepreneurs by Fortune Magazine. Outrage followed suit with people feeling that they had been duped by a business savvy woman not wanting to pay for her kid’s camp. Unkind words were posted to Susan’s funding page, threats were made and all sorts of unnecessary actions followed suit. Where some, myself included, saw a successful parent choosing to teach their child how to be self-reliant and earn funds on her own. (The writer does recognize that this sounds odd as she was explicitly asking other people to give her their money, but hopes you get what he is trying to convey here) Others saw it as a con and wanted their money returned. While I think that the campaign was completely honest, I must accede that the campaign was acting in violation of Kickstarter’s own guidelines which state that campaigns cannot be for charity, or ventures of the “fund my life” nature, such as vacations or tuition.
None the less, Mackenzie received the funding and has done good on her promise and has not only created a game called “The Making of Truth & Trolls”, but also a website called PinkieSquare.com, a ” safe place for kids to learn, share, create, play and test one another’s games”.
Proof and evidence that Crowdfunding campaigns are not pre-orders, but a sign of faith in the person being able to handle the stress and hard work of creating a business and pushing out a profitable product. In 2011, Molly Friedman, of Seattle Washington had a great idea for a new board game that led its players through am adventurous journey that concluded with the saving of the galaxy. It was promised to be a cross between Risk and Magic the Gathering, I’m not sure how that would work, but the mock-up she made looks like fun.
She set her goal at a practical $7500 and received just over that by the end of the campaign. A few months in, everything seemed on par. She was posting frequent updates on the campaign page, letting investors know that she was completing art for the cards, and in August, stated that she would begin boxing up final products by early December of that year.
By February of 2012, the milk began to sour when she posted that she was having “printing and paper problems”, and was “feeling a little overwhelmed by it”. She then followed up in March by saying that production printing was starting and she had all the wood boxes and packaging in hand, but by June she felt it was time to let the world know that she had, “been harassed by a voice that is claiming to be the sun, and it’s been attacking me and harassing me almost every hour of the day”.
I’ll let that sink in for a bit…
She claimed to hear voices claiming to be the sun! At this point, anyone still hoping to see a return on their investment should have realized that that likelihood was in the tenths of a percentile. Still, on Dec 24th, Molly returned to the funding page to promise, “…that I am not lying and that I will finish printing the game and send everyone what they paid for. It’s what I owe you, and if I was trying to rip you all off I wouldn’t be documenting my experiences of the last 2 years online in detail. I would have disappeared and changed my name long ago, if I had no intention of finishing the game”.
I’ll tell you Katalyka invester’s one thing… you rolled the dice and you lost. I feel bad for you. I really do, but did you not see this coming. Do you really think someone can create just 85 Monopoly boards with only $7,500?
7. Lockpicks by Open Locksport
Schuyler Towne, a “competitive lockpicker” from Boston, MA created a crowdfunding campaign to help fund the creation of his own line of “homebrew” mass production lockpicks. In his campaign video, he displayed his lockpicking skills, explains how he came to be involved with the lockpicking community and details why he prefers his hand made lockpick over the type that can be picked up online.
The lockpicking tools he displayed in the video look marvelous and would be a great addition to anyone’s Go-Bag kit. Unfortunately, his initial funding request was $6,000 and he instead received $87,407 from 1,159 backers. That’s a lot of lock picks! Eventually, as is the case with things like this, Schuyler got backed up and came to the conclusion that he wasn’t going to be able to fulfill his intended promise of custom designed lockpicks to all of his investors. He wasn’t a scam artist either and he wanted to make sure that he didn’t cheat people out of their money completely, so he opted to create and ship out what he could. Instead of receiving the very cool and almost cyber-punky lockpicks displayed in the video, investors are being sent items very similar to those Schuyler said he didn’t like to use. I admire his scrupulousness for sticking to it and getting a product to market, it’s a hard business. I just hope that people begin to take heed before letting the ideas of dreams to come take control of their wallets.
* Bonus: Investor Scamming
Just to try and confirm that I don’t have some aversion to those requesting investments through crowdfunding, I thought I’d end this piece from a different perspective. This tale is of one internet shyster that rips off those seeking funding.
A Kickstarter user going by Encik Farhan has made a name for himself as being the first known Scam Backer. He’s become nefarious in the Crowdfunding circle after successfully scamming about 100 different projects. His method was clever enough. He’d donate a large sum of money to a campaign, one that would catch the eye of the person or group campaigning and wait for the promised product. Once in hand, he’d then dispute the charges with Amazon (they handle Kickstarter’s payments) and get his money back. With just a few clicks and a few moments on the telephone, Encik was able to reap the benefits of investing in successful people without actually donating anything. Sure, you could say that his large investments raised enough hoopla to help those campaigns bring in more pledges, but the action is still deplorable.
Kickstarter has stated that out of its millions of backers, Farhan was “a single bad apple” and have since deleted his account, canceled his pledges and banned him from the site.
I still think that Crowdfunding is a great idea and will continue to invest in those that I believe have the knack for getting to market. I also will be sure to perform due-diligent research before hitting that fund button as well. I hope that this piece opened your eyes a bit to the dangers of trusting strangers online. Just because someone has a nice video describing a cool idea doesn’t mean they’re responsible enough to perform the actions needed to complete their task. Also, if you take the time to research the companies/people behind a project, you will find that there are far more trustworthy and assiduous people seeking funding than those that aren’t. Take your time, investments like these don’t often give returns based on order in which you bought in, so being first isn’t imperative.