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FTC, Federal Court Views on Fraud In Crowdfunding Ventures

In a release this summer, the FTC announced it had brought and settled its first case involving crowd-funding. The settlement order should serve as a reminder that strong legal remedies at both the state and federal level are available to defrauded contributors.

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In a release this summer, the Federal Trade Commission (FTC) announced it had brought and settled its first case involving crowd-funding. The defendant, Erik Chevalier, raised more than $122,000 through Kickstarter to produce The Doom That Came to Atlantic City, a Monopoly-like board game geared towards H.P. Lovecraft fans. According to the FTC’s complaint, Chevalier instead used the Kickstarter proceeds to pay for personal expenses, including his move to Oregon. The FTC/Chevalier settlement order should serve as a reminder that strong legal remedies at both the state and federal level are available to defrauded contributors. Content creators considering a donation crowd-funding campaign need to understand the level of communication that backers expect and should be prepared to refund any remaining contributions if it turns out the intended benefits cannot be delivered.

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