Crowdfunding Fraud at Critical Mass – Without New Controls, Sector Failure is Imminent
We’re going to exclude equity crowdfunding from this conversation of crowdfunding fraud at critical mass since existing government regulation and compliance is already in place as an excellent preventative mechanism when it comes to crowdfunding fraud. Anyone running an equity crowdfunding campaign knows full well they are facing federal prison along with hefty fines and penalties for attempting crowdfunding fraud.
On the other side of the crowdfunding world there is reward crowdfunding and personal crowdfunding. There have been instances of crowdfunding fraud for years (The Triton Underwater Breathing Gills, The Skarp Lazer Razor, etc.) where millions got raked in and nothing got delivered. Product-based crowdfunding fraud has been going on for years and there are very few, if any, practical way to stop it.
Crowdfunding fraud at critical mass really rings true with the latest suspected, but not yet proven, crowdfunding scam to make headlines: Katie McClure’s GoFundMe Page for Johnny Bobbit. The Bobbit GoFundMe scandal increases fears of crowdfunding fraud to all time highs. GoFundMe crowdfunding fraud is nothing new. In fact it’s been prevalent for years so much so that a volunteer website GoFraudMe was started to try and stem the tide of crowdfunding fraud.
Personal crowdfunding does lead to happy endings such as the case of James Robertson known as the “Walking Dude of Detroit”….
In case you’re wondering, this incredible man not only ended up with the new car – he ended up with a brand new beautiful home. This clearly shows the positive power of crowdfunding in action. Yet we’re forced to keep a very close eye on the dark side.
There is a lingering dark cloud of skepticism hanging over the reward and personal crowdfunding sectors.
Now with crowdfunding fraud at critical mass it’s clear that crowdfunding platforms like Kickstarter Indiegogo and GoFundMe need to pay close attention to this crisis. While there is no clear-cut way to determine if fraud is at work until after it has happened, there are fraud-prevention controls that can be put in place to make attempts at fraud much more difficult. One idea that comes to mind is a pro bono attorney service to act as a trustee of the funds and/or a certified public accountant to supervise proper, judicious dispersal of all funds. Whatever they do, they have to do something substantial.