Uncovering Legal Battles Against Kickstarter/Indiegogo Campaigns: Cases and Insights

While many Kickstarter campaigns succeed in reaching their goals, there have been instances where backers have faced significant disappointments. In some cases, these issues have escalated into legal battles. This article explores three notable cases where backers sought legal action against projects on platforms like Kickstarter and Indiegogo.

Failed Board Game: The Hansfree iPad Holder Project

The Hansfree iPad holder project faced a dramatic end when its creator left the country with a substantial portion of the raised funds. This created a situation where backers were left high and dry. Backer Richard Halvorsen, who happened to be a lawyer, took legal action to seek a 70% refund. Unfortunately, the project creator filed for bankruptcy, resulting in no recovery for the backers.

Indiegogo Project - Asylum Playing Cards

The Asylum playing cards project faced another scenario where the project creator went missing after the deadline for delivering rewards. A state Attorney General, on behalf of 31 affected backers, took legal action against Ed Nash. The case was successfully prosecuted, resulting in Nash being ordered to make restitution and pay a $31,000 fine. The judgment awarded each of the 31 Washington state backers restitution of $668, along with additional penalties for violating the state Consumer Protection Act. The required payment helped initiate the shipment of the playing cards to the backers as per the Kickstarter comments.

A Failed Board Game: Doom That Came to Atlantic City

In the case of the Doom That Came to Atlantic City board game, the project creator, Erik Chevalier, misappropriated funds, leading to a failure to deliver the promised product. Despite a lawsuit by the FTC, the settlement resulted in a cease-and-desist order against the future misrepresentation of crowdfunding campaigns and adherence to refund policies. Nevertheless, a happy ending was provided when Cryptozoic Entertainment stepped in to print and distribute the game for free to the backers involved in the failed campaign.

Lessons and Conclusions

While these cases demonstrate the potential for legal action against crowdfunding failures, it is important to note that legal recoveries are often minimal. Backers face significant obstacles in litigating against creators, especially when the project fails but the funds have been spent or lost. Additionally, even when legal action is successful, the cases may not be widely publicized due to the financial drawbacks to the backers. As of 2017, the focus has largely been on project business failures, with little activity on the state or federal level.

Conclusion

While there have been notable instances of legal action taken against failed Kickstarter and Indiegogo campaigns, the reality often suggests that business failures are viewed as such. Despite the occasional successes in litigation, the financial and logistical challenges for backers can be formidable. These cases serve as cautionary tales for both creators and backers in the crowdfunding space, emphasizing the importance of due diligence and clear communication.