Crowdfunding Scams

It’s natural to take pity on the unfortunate, but the operators of crowdfunding scams have no pity on anyone, lest of all you.

As everyone knows, the internet is transforming just about everything. From retail sales to news sources, personal ads to banking. It’s also transforming generosity. Crowdfunding sites – like Kickstarter, Indiegogo, Causes, GoFundMe, and others – allow otherwise anonymous people to raise money from anyone online who happens to stumble on their stories. The internet makes that simple to do. After all, a social media post that goes viral can literally reach untold numbers of sympathetic contributors overnight. Of course, so can crowdfunding scams.

The Growth of Crowdfunding

Statista, perhaps the world’s leading provider of market and consumer data, estimates that Good Samaritans in the United States alone contributed almost $7 billion in 2019 to people on crowdfunding sites. That figure is growing by an average of 14.7% annually. If that statistic holds, it means that in 2023 Americans will donate almost $12 billion to crowdfunding causes.

Likewise, the raw number of crowdfunding cases is also expanding. In 2019 there were 8,724,000 worldwide. In 2023 there may very well be 12,063,900. All too many of them describe tragedies and traumas that will appeal to your instinctive kindness. And dishonest people who invent crowding scams know that.

Busting Crowdfunding Scams, Example #1

On June 10, 2015, the U.S. Federal Trade Commission filed suit in the first-ever crowdfunding case. Erik Chevalier. He ran a business by the name of “The Forking Path,” and raised more than $122,874 from 1,246 people on Kickstarter. Chevalier promised to use the funds to produce a board game he called “The Doom That Came To Atlantic City.”

The doom, however, came to his victims, not Atlantic City. That was because Chevalier didn’t produce anything. Instead, he used the cash to buy a few items, pay his rent and move to Oregon. That’s as far away from Atlantic City as you can get in the continental United States. At first, he told his victims that he would refund their money, but he didn’t. After investigating the case, the FTC found that the victims “suffered and will continue to suffer substantial injury.” Moreover, it believed that without a settlement, Chevalier would “likely to continue to injure consumers, reap unjust enrichment, and harm the public interest.” Chevalier quickly settled the case.

Busting Crowdfunding Scams, Example #2

In another widely publicized case, the FTC, and subsequently the State of Texas, filed suit on May 6, 2019 against Douglas Monahan. He operated a company called iBackPack of Texas, LLC. Over a period of more than three-and-a-half years, Monahan took in more than $800,000 by running not just one but four different crowdfunding scams. He told his contributors that he planned to use their money to develop a line of new products, but didn’t. He, “acting alone or in concert with others,” spent it on personal expenses instead. Including purchasing bitcoin, ATM withdrawals and paying off personal credit cards.

iBackPack of Texas ignored repeated requests from most of its victims to refund them their funds. It then closed down in an attempt to avoid them. Some victims reported that Monahan threatened them. iBackPack of Texas also made sure to transfer remaining funds into accounts held by four other companies that Monahan controlled. Once again, after a lengthy investigation, the FTC found that these consumers “suffered and will continue to suffer substantial injury.” And that Monahan and his co-conspirators “have been unjustly enriched as a result of their unlawful acts or practices” and “are likely to continue to injure consumers, reap unjust enrichment and harm the public interest.” 

The (In)famous Homeless Vet Crowdfunding Scam

The most publicized crowdfunding scam, however, is undoubtedly the appeal on behalf of a homeless marine veteran. Mark D’Amico, his then-girlfriend Katelyn McClure and the vet, Johnny Bobbitt. D’Amico and McClure asked for donations on GoFundMe to get Bobbitt back on his feet. They claimed that the impoverished vet gave McClure $20 after her car ran out of gas. Now they want to return the favor. They raised $400,000 from 14,000 donors.

The story was a natural tearjerker, but it was also completely fake. The trio first met at a Philadelphia-area casino in October 2007, where they cooked up the scheme.  

Soon the three began to argue among themselves about the money. Bobbitt, who wound up buying a home, claims he received $75,000 but the two others claimed they handed him $200,000. He accused McClure and D’Amico of using the bulk of the funds to finance ritzy handbags, jewelry and a lavish New Year’s Eve trip to Las Vegas. They withdrew as much as $85,000 from ATM machines, all in the vicinity of New Jersey, Pennsylvania and Nevada casinos.

The (In)famous Homeless Vet Crowdfunding Scammers

Ultimately, all three were indicted, but only after they became a national sensation and toyed with a proposal to write a book (with the ironic title of No Good Deed). The publicity the story generated including a guest appearance on Good Morning America – undoubtedly only encouraged more people to willingly fall victim to the scam.

D’Amico eventually pleaded guilty in a New Jersey court to misapplication of entrusted property. He received five years in prison. In addition, federal authorities eventually indicted him on 16 counts of wire fraud and money laundering. McClure and Bobbitt pleaded guilty to different state and federal charges. GoFundMe refunded the money to the victims.

If you think you’ve been the victim of a crowdfunding scam, contact the fund recovery experts at MyChargeBack.