We recently reported on Triton, the fake gadget that allows you to breathe underwater. It had raised $600,000+ when we published the article, but today, the figure is around $338,327 as we believe many people figured out their scam and got a refund. But there are still MANY people who believe in tech projects which are too good to be true, and you should stay away from them. Please do proper research before fund any project. Yes, some projects are great and deliver great value, but there is a lot of shady stuff going on and we decided to let you know some of the earlier ‘scams’ that succeeded on Kickstarter or Indiegogo.
Quantifying the number of crowdfunding campaigns that later turn out to be ‘scams’ is difficult, because research can only find out about ones that make it into the news. There could be dozens, hundreds of other campaigns that quietly disappear and nothing more is ever heard from either starter or donors. Kickstarter’s policy is that donors do so at their own risk – they do not enforce the rewards offered nor offer refunds once payments have been processed, though creators do have a legal obligation to either fulfill promises or offer a refund.
That said, here are some of the most high profile cases from recent years, numbered randomly.
1. MAGNUS FUN, INC.
One of the most famous crowdfunding scams to date. Pitching to create beer-flavoured beef jerky out of pure Kobe beef, this campaign raised more than $120,000 from over 3,000 people before a Kickstarter documentary film team started doing some digging. The creators were reluctant to engage with the team – preferring e-mail contact and vague messages, never willing to meet in person. The team then hired a private investigator to dig further, publishing their findings in a tattletale Reddit post. Promptly after the post was published, backers were notified the campaign had been halted (luckily just before payments were due to be processed over to the creator). Kickstarter famously never comments on the specifics as to why it cancels projects, but clearly the information unearthed by the film crew set alarms bells ringing.
2. KREYOS METEOR
A true horror story in crowdfunding scam, The Kreyos Team raised an incredible $1,502,533 (yes, thats above $1.5 million) for their high tech smartwatch. Ambitious from the start, the project promised to deliver a smartwatch that was waterproof, voice controlled, a fitness tracker, gesture controlled, the works. Apparently they were able to promise all this because full prototypes had already been made. It then took more than a year for the first, meager prototypes to began trickling out to early backers – and when they were received, donors felt conned. The watches were poorly designed with cheap technology and very few of the promised features. Very little (read: nothing) has happened since and certainly not the ground-breaking technology that donors were promised. Their excuse? Its not our fault, it is the fault of China-based Viewcooper Corp.
Even more disturbing is pictures have since surfaced of one of the creators, Steve Tan, apparently spending money like a king.
Photos allegedly posted to his personal Facebook profile include him with a new Ferrari and another in front of a large pile of shopping bags from designer stores. Mr. Tan quickly upped his privacy settings and also erased any paper affiliation with Kreyos following the incident.
We have to give this one some credit. This campaign not only swindled backers, but Ouya gaming console guys and Kickstarter itself! The company created a one million dollar ‘Free the Games Fund’, where they would match funding for any game that was for Ouya’s gaming console. The creator was accused of setting up fake accounts and pledges to inflate the profile, thus breaking Kickstarter’s rules and ultimately being kicked out – but not before getting more than $50,000 pledged from over 800 donors.
One of the largest campaigns suspended on Kickstarter. Creators promised a Bluetooth item locator that works battery-free. They had raised around half a million dollars ($546,000 to be exact0. As backers began to ask questions about how the technology worked, the company began to stop responding, claiming the tech was being patented “soon”. As it became clear that the creators clearly hadn’t even started, Kickstarter suspended the campaign.
5. LUCI BY GPX TECHNOLOGIES
Promising a very high tech device to “induce lucid dreaming”, Luci raised around $330,000 from 2,500 donors before actually being suddenly cancelled by the creator when backers began questioning their Photoshopped images and the technology behind it. Thankfully, all 2,500 donors got their money back, To this day, the creator GPX Technologies maintains that the product is actually in development under “private financier” (has been 3 years and no sign yet). A company that can’t design a decent webpage (see the link above), will design this high tech gadget? Only in Luci dreams…. 🙂 [FunFact: Luci means ‘sheman’ or a man who is not ‘man enough’ in Sindhi Language]
6. CRYPTRADE, INC.
Proporting to develop a USB memory stick with 256bit AES encryption, this campaign got off to a great start. Raising over $196,000 from almost 1,000 backers, it definitely seemed promising. However, the creator starting posting less and less updates and eventually claimed the company had been sold on. Under the new ownership, they did start promising refunds to all backers as there was still no product in manufacture. The founder, Fahad Koumaiha, has apparently moved on to another dodgy-looking startup for bitmining, FrostBit.
7. DAVID LAM
Appearing on Indiegogo shortly after the 2015 Superbowl, David Lam promised to develop a shark suit costume replicating the one worn by dancers behind Katy Perry and donate any profits to charity (He still maintains the above linked site and claims to do it for charity!). The project gained almost viral status – quickly amassing more than $93,000 from over 1,200 donors. The beginning seemed promising – Mr. Lam posted frequently as to how the costume was developing.
But then as deadlines came and went, communication dropped off. Eventually, he was tracked down and agreed to cancel the campaign and refund donors. Mr. Lam has publicly spoken about what happened, saying he never intended the enterprise as scam, but that the response had been too overwhelming for him to manage. As money was already released to Mr. Lam, even when refunds do happen, they will be minus any fees and already-spent money. Up to date, there has been NO refund!
Is there light at the end of the tunnel?
In 2015, the first case involving crowdfunding was settled. The Federal Trade Commission (FTC) settled charges against a man who received $122,000 to develop a board game that never materialized. Apparently Erik Chevalier did cancel the project and promise refunds, but the FTC found him guilty of using the money to instead pay his rent. Earlier in 2014, Washington state Attorney General had attempted to bring a similar case to court – suing Edward J. Polchlopek for never delivering the playing cards with custom artwork he promised in exchange for donations. That case was settled shortly after the FTC one, awarding $54,000 in penalties and refunds to donors. So maybe, just maybe, if the FTC gets more agressive, and Kickstarter, Indiegogo, GoFundMe and other crowdfunding websites make their requirements more stringent and in case of a fraud, release the creators details (like ID/Passport/IPs) to the public, we are sure the number of scams will go down by a huge margin.
While not an official source, there is a platform recognizing the need for donors to flag any potential scams or fraudulent projects. Kickscammed.com offers a facility to submit and read about crowdfunding projects where their valildity is in doubt (but they have also missed may scams like the Trinity one, so do your due diligence. We are also ready to help you in any case. If you come across a gadget or a tech related item, shoot us a comment or an email and we’ll try to investigate whether the project seems legit or not.
Special thanks to AskWonder who have helped with this research. Click the referral link and you'll also get $15 in credit, which you can use for any research. It's worth it, trust us. Plus the first one is free, so whats the harm, right?