A Texas man who raised $800,000 for a failed “iBackPack” project on Indiegogo and Kickstarter has been banned from crowdfunding ever again after he was found using the money to pay for his own personal expenses.
On Monday, the Federal Trade Commission reached a settlement with iBackPack’s founder, Doug Monahan, who raised the funds for his project from more than 4,000 supporters starting in 2015.
The project was supposed to produce a “next-generation backpack” loaded with features including wireless charging for your devices, a stereo system, numerous power cords, and the option for a Wi-Fi modem. But according to the FTC, Monahan never spent the funds from his crowdfunding campaigns to produce the backpacks. Instead, he allegedly used the money on Bitcoin purchases, ATM withdrawals, paying off his credit cards, and buying advertising for other business ventures.
The FTC’s investigation came in response to hundreds of complaints the agency received from the project’s supporters, who never received a backpack. “Some consumers have also complained that Defendant Monahan sent threats to try to silence their criticism, including by telling one consumer that he knew where the consumer lived and had other personal information about the consumer,” the commission said in a court complaint against Monahan last year.
Under the settlement, Monahan is forbidden from engaging in new crowdfunding activities. However, the FTC was unable to recover the funds raised in the iBackPack project because Monahan apparently spent all the money. Nevertheless, he will need to report his finances over the next 20 years; if new assets are uncovered, he'll be forced to pay up.
“Crowdfunding is a legitimate way to raise money for your business venture, so long as you use that money for the business and not yourself,” said Andrew Smith, FTC’s Bureau of Consumer Protection director in today’s announcement.
Indiegogo and Kickstarter say they can’t guarantee every crowdsourcing project will come through on its promises. At the same time, not every product hosted on their platforms will undergo an extensive review. So it’s a good idea to first do some research and fully grasp the risks before giving your money to a crowdfunding campaign.
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