Crowdfunding Fraud

First cases appeared in the United States around 2012-2013 as Kickstarter projects failed to deliver; the FTC brought its first action in June 2015.

Kickstarter (2009), Indiegogo and GoFundMe (2010) created a new way to raise money from strangers, and fraud followed within a few years: creators who took pledges and never delivered, and charity-style appeals built on invented stories. The FTC's first crowdfunding case was against board-game creator Erik Chevalier in 2015; its iBackPack case (2019) involved more than $800,000 raised for a product never made. The most famous personal-appeal case was 'Paying It Forward' (2017), in which a New Jersey couple and a homeless veteran invented a roadside good-deed story and raised $400,000 from 14,000 donors.

Reward-based fraud: a creator posts a product or game with slick renders, collects pledges, then spends the money on personal expenses and posts excuses until the campaign is abandoned. Donation-based fraud: a campaigner invents or exaggerates a hardship (illness, disaster, a heroic stranger), amplifies it through media, and withdraws the funds. Platforms refund some donors from their own guarantees, but the money is usually gone. Prosecution comes under general theft, wire-fraud or deceptive-advertising law.

A campaign page costs nothing and a viral story can raise hundreds of thousands in days, with payouts before any delivery. Platforms police lightly and refund donors themselves in high-profile cases, so few frauds are reported to police; the FTC has brought only a handful of actions and judgments are usually suspended.

No body publishes a total; the best-known cases are the $400,000 'Paying It Forward' hoax (2017) and the $800,000 iBackPack campaign (2019). The wider harm is to trust: genuine medical and disaster appeals lose donors after each exposed hoax.