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Crowdfunding is one way to support a project you believe in and get rewards for that support. But the project you’re backing is only as good as the people behind it. Some dishonest people can take your money but produce nothing – no product, no project, and no reward.

Here’s how crowdfunding works: People called "creators" ask for small amounts of money from lots of people to fund projects through websites like Kickstarter or Indiegogo. In exchange, creators offer rewards to contributors, like a product that the creators are trying to make. Sounds great…unless the creators don’t create anything but profit for themselves.

In its lawsuit against iBackPack, the FTC says people shelled out over $800,000 via crowdfunding campaigns. The company said those funds would help it provide consumers with backpacks and shoulder bags with built-in batteries for charging mobile devices. But, according to the FTC, iBackPack’s claims that bags would soon be going out to consumers were lies. What’s more, the FTC’s investigation found that the money the creators took in from their campaigns generally didn’t go toward what they said it would. Instead, the FTC says, iBackPack’s CEO pocketed a large part of the funds for his own personal use. And when people began to complain, the CEO allegedly threatened some of them – adding that he knew their addresses and other personal information.

If you’re thinking about contributing to a crowdfunding campaign, take a minute to research the creator’s background and reviews before you pay. For example, has the creator engaged in previous campaigns? How did those campaigns turn out?

If you learn about a crowdfunding scam:

 

8 Comments


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The purpose of this blog and its comments section is to inform readers about Federal Trade Commission activity, and share information to help them avoid, report, and recover from fraud, scams, and bad business practices. Your thoughts, ideas, and concerns are welcome, and we encourage comments. But keep in mind, this is a moderated blog. We review all comments before they are posted, and we won’t post comments that don’t comply with our commenting policy. We expect commenters to treat each other and the blog writers with respect.

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Krlyman
May 06, 2019
How do we know if a political group is legitimately asking for funds or are scamming folks?
MzB
May 10, 2019

In reply to by Krlyman

I received a phone call from "the Democratic National Committee" asking me to donate. I said I don't donate by request and asked for a phone number that I could call to make a donation. The person refused to give me information and said it was "donate now or never". I told her she was working for an illegal scamming company and she should wake up and smell the roses because she was cheating people. I then hung up.
Anoid
May 15, 2019

In reply to by Krlyman

You don't. If you want to contribute to a campaign or political organization look up their website & initiate the donation yourself! I don't give anyone debit or cc info over the phone. I tell them to mail me the info so I can check them out. If it's a "debt collector" I ask them to mail a statement. Any threats made if I don't pay immediately just confirms it's a scam.
Honor
May 06, 2019
Just a bit of research will save you lots of money and grief. Crowdfunding also occurs on social media sites such as facebook where users plead for 'donations' on their birthdays towards supposed causes.
librariall
May 06, 2019
You didn't mention the people who ask for medical funding. Is this a legitimate purpose for crowdfunding? Also, around our area, a person was trying to get funding for his friend, "who had four kids and was raising them by himself." Really, how many women have done just that for myriads of years and never asked for a cent? Sounds fishy to me.
Thought_Experiment
May 07, 2019
The main purpose of this warning is that crowd-funding comes with risk. And, you have to do your due diligence and trust your feelings when it comes to choosing which product you fund. The websites can only show you the product. There are always going to be scammers, but you have to listen and look at the drive of the person(s) asking for funding.
Hunky Sting
May 13, 2019
My mobile had been hacked and been transform become a computer.All my email can't and hard to be reached to me.And i can't using a website.The hacker and spammer had been controlled my mobile.All a prizes that i won in USA i can't get.Please help me.
Don't use your…
September 13, 2019
8559480453 this threatening to take money away if I do not keep the number