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Kickstarter project hit by consumer protection complaint for failure to deliver

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40hz:
I'm filing this one in my "I told you so!" folder.

From the good folks at Techdirt comes this:

Washington State Files First Consumer Protection Lawsuit Against Kickstarter Project That Failed To Deliver
from the don't-kickstart-if-you-don't-plan-to-deliver? dept


I've backed a few dozen Kickstarter projects over the years, and there have always been questions about possible fraudulent projects. While I've personally found that nearly every project delivers late (often very, very late), I don't think any of the projects I've backed has completely failed to deliver (there are a couple I'm still waiting on, though...). Still, the risk of such a "default" is always a possibility, and that's always been the case. Backing a product at an early stage always comes with the risk that it may never deliver. Kickstarter itself has tried to do a better job in making people aware of this upfront with its "Kickstarter is not a store" claims.

However, Washington State's Attorney General has decided to file a consumer protection lawsuit against one project that failed to deliver.

    The state’s top lawyer, Bob Ferguson, said Thursday his office has filed the first consumer-protection complaint in the U.S. to target a Kickstarter fraud.

    The lawsuit alleges Edward Polchlopek III and his company, Nashville, Tenn-based Altius Management, in 2012 raised more than $25,000 from 810 people in order to print a deck of “retro-horror”-themed cards designed by a Serbian artist.

    Among those backers were 31 living in Washington state, according to the suit, which was filed in King County Superior Court.

As the actual filing notes, two years later, nothing has been delivered and no money has been returned. Rather than just seeking the return of the $25,000, the lawsuit asks for $2,000 per each backer, meaning that Altius Management may be on the hook for a potential $1.6 million. <more>

--- End quote ---

Apparently, these guys:


* met their initial $15K goal and went on to get over $25K from 810 backers
* promised all rewards would be delivered to backers by December 2012 - but did not deliver anything
* stopped updating their campaign page in July 2013 and basically disappeared off the face of the earth, and...
* still had not communicated or delivered anything to their 810 supporters as of April 2014 when the state AG's office filed against them
I think it's unfortunate this happened. But I also think it was inevitable. (Truth is, I'm surprised it took this long.)

It's sad how many otherwise smart people think that the rules of business - and existing laws - no longer apply when doing things on the web.



 :(


----------------------------------

Addendum: the comments over on the Kickstarter campaign page are pretty interesting. I don't see much sympathy for the campaign - or Kickstarter's management either.

Here's one particularly telling comment (emphasis added):

Twice I asked KS Admin to get involved, twice I got the mandatory shrug off "sorry, can't do a thing" response. That is irresponsible. You don't provide a service, cream off a cut, and then turn your back on what's going on while you count the cash earned from that cut. I may not get my money back, as I'm a UK resident, but I wish the prosecution and the Washington crew all the best. If anything comes out of this, I hope there's better governance and protection for future backers and creators too, from the people who run this site.
--- End quote ---

I think some chill breezes are about to start being felt in Kickstarter's cosy little virtual world. :tellme:

(Note: Being a playing and tarot card collector myself, I also think "collector's disappointment" is driving a lot of this. The concept for the deck was brilliant and highly original. And the artwork was drop-dead gorgeous. This deck could easily have become a much sought after "investment grade" collector's deck.)

wraith808:
I think some chill breezes are about to start being felt in Kickstarter's cosy little virtual world.
-40hz (May 06, 2014, 02:07 PM)
--- End quote ---

I think two issues are being conflated here.

The first is the responsibility for delivery and the suit.  These are totally in the way that things should be done, and I think it's telling that kickstarter itself as a platform is not a defendant in the suit.  If you collect money, even on a speculative venture like this, you open yourself up to a responsibility to deliver. 

But I think that has little to nothing to do with the platform in and of itself.

Kickstarter gives a platform for the offering, and for that platform, charges a fee, and dispenses funds.  To expect that they would have control over each individual offering is pretty ludicrous.  Even the payment platforms, i.e. MasterCard, Visa, Amazon, have limits to the claims on such.

The first paragraph of the quote follows my beliefs, i.e.:
I've backed a few dozen Kickstarter projects over the years, and there have always been questions about possible fraudulent projects. While I've personally found that nearly every project delivers late (often very, very late), I don't think any of the projects I've backed has completely failed to deliver (there are a couple I'm still waiting on, though...). Still, the risk of such a "default" is always a possibility, and that's always been the case. Backing a product at an early stage always comes with the risk that it may never deliver. Kickstarter itself has tried to do a better job in making people aware of this upfront with its "Kickstarter is not a store" claims.

--- End quote ---

A few hundred in my case... and a few have packed up shop, but that's how I determine what to back and how much, and as such, the 3-5% failure rate is acceptable to me.  But if it weren't, I'd be within my rights to sue the project creator over non-delivery.

TL;DR  - the suit is unfortunate and the situation for those backers.  They are well within their rights to have pursued action.  But to claim that Kickstarter has an obligation or any power over the backend situation is a pretty specious claim IMO.

40hz:
I think some chill breezes are about to start being felt in Kickstarter's cosy little virtual world.
-40hz (May 06, 2014, 02:07 PM)
--- End quote ---

I think two issues are being conflated here.

The first is the responsibility for delivery and the suit.  These are totally in the way that things should be done, and I think it's telling that kickstarter itself as a platform is not a defendant in the suit.  If you collect money, even on a speculative venture like this, you open yourself up to a responsibility to deliver.  

But I think that has little to nothing to do with the platform in and of itself.

Kickstarter gives a platform for the offering, and for that platform, charges a fee, and dispenses funds.  To expect that they would have control over each individual offering is pretty ludicrous.  Even the payment platforms, i.e. MasterCard, Visa, Amazon, have limits to the claims on such.

The first paragraph of the quote follows my beliefs, i.e.:
I've backed a few dozen Kickstarter projects over the years, and there have always been questions about possible fraudulent projects. While I've personally found that nearly every project delivers late (often very, very late), I don't think any of the projects I've backed has completely failed to deliver (there are a couple I'm still waiting on, though...). Still, the risk of such a "default" is always a possibility, and that's always been the case. Backing a product at an early stage always comes with the risk that it may never deliver. Kickstarter itself has tried to do a better job in making people aware of this upfront with its "Kickstarter is not a store" claims.

--- End quote ---

A few hundred in my case... and a few have packed up shop, but that's how I determine what to back and how much, and as such, the 3-5% failure rate is acceptable to me.  But if it weren't, I'd be within my rights to sue the project creator over non-delivery.

TL;DR  - the suit is unfortunate and the situation for those backers.  They are well within their rights to have pursued action.  But to claim that Kickstarter has an obligation or any power over the backend situation is a pretty specious claim IMO.

-wraith808 (May 06, 2014, 02:58 PM)
--- End quote ---

I don't think it's entirely accurate to say the issues are being conflated. There's the alleged fraud surrounding the failure to deliver on a contractual obligation on the part of the campaign itself. And then there's the larger issue of whether or not Kickstarter's "don't ask, don't tell, not my problem" policies permit or encourage such fraud to take place under their roof. That's definitely not a discussion Kickstarter wants regulators or state attorneys to start having. Because there are rules and legal theories surrounding contributory negligence and "aiding and abetting." And just saying "we didn't know" or "we don't get involved with that stuff" doesn't change any of that. Especially if it's happened more than once or twice. Like the old saying goes: "Dupe me once - shame on you. Dupe me twice - shame on me."

Kickstarter uses a lot of language to completely excuse itself from culpability (or even the slightest hint of responsibility) for anything that goes down on it's website. This argument is much like the "safe harbor" concept of ISPs not being responsible for content posted on or through them. Which is fine when it comes to words. But it's pretty self-serving where money transfers (and their percentage takeoffs) are involved. And like it or not, there are some major regulatory and legal frameworks in place that govern conduct and responsibility in such matters. Kickstarter insisting things are "different" with them because...well..."just because" isn't going to hold much water if it starts to hit the fan.

I think Kickstarter has been given a pretty free ride (so far) considering the amount of money that passes through them. And that's largely because most in government and business saw that an open incubator arrangement might serve a valuable purpose and therefore gave them the benefit of the doubt and cut them a lot more slack than they have most investment matching services. (And yeah - I know it's for "projects" - not "investments." But Kickstarter doesn't get to make up it's own definitions or claim it's own interpretations of things because...well..just because.)

And that's unfortunate. Because if it continues, Kickstarter may soon discover it's well got poisoned by those people who went in without a clue, and tried to walk away without a word. Kickstarter needs to get more involved when complaints by supporters get made. Stonewalling and turning a blind eye isn't going to get Kickstarter off the hook if there's a problem. Life is never going to be that simple. Even when it's on the web.
 :huh:

Re: TL-DR :(

That's rather unfortunate. People really should make an effort to read some of this stuff. Because it's those persnickety details and legal theories that our business and financial world operates under. And sometimes, once you struggle through and actually read real court filings, you develop an appreciation for the logic behind it as well. (Hint: it's nothing as simple as the "big & mighty vs the small" conspiracy stuff a lot of self-taught economic types and "freethinkers" would like us to believe.) ;)

superboyac:
(Note: Being a playing and tarot card collector myself, I also think "collector's disappointment" is driving a lot of this. The concept for the deck was brilliant and highly original. And the artwork was drop-dead gorgeous. This deck could easily have become a much sought after "investment grade" collector's deck.)
-40hz (May 06, 2014, 02:07 PM)
--- End quote ---
they do look great.

tomos:
It looks like all the artwork was (more or less) done, but none of the printing...

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