Washington’s attorney general has filed what’s believed to be the first government action against a failed crowdfunding campaign.
Sites like Kickstarter have become a popular way to finance start-up projects. But there’s also financial risk when you kick-in money to get a music or art project off the ground. Sometimes the sponsor doesn’t deliver.
Some 30 victims in Washington now know that firsthand.
Crowdfunding highs and lows
The Veronica Mars Movie Project is an example of a wild Kickstarter success. To the uninitiated, Veronica Mars was a television series that debuted on the UPN network back in 2004. It developed a loyal following. As the story goes, creator Rob Thomas wanted to make the show into a movie, but he couldn’t get funding. So last year, the TV show turned to Kickstarter.
The Kickstarter campaign raised a whopping $5.7 million -- nearly three times the original goal. The movie debuted this spring.
If that was Kickstarter’s shining moment, then consider what happened with something called the Asylum Playing Cards project.
“I think it was a scam,” says Brad Lansford, a game designer from Washington state. In 2012 he came across this Kickstarter video for the Asylum project.
It shows a unique deck of playing cards from “the dark and twisted mind of an underground Serbian artist.” Among the images: hearts made to look like dripping blood stains. Lansford liked the art and backed the project with $9.
“I was mostly backing it for the artist,” he says.
In return for his $9, Lansford was promised one Asylum deck of cards with free shipping. By October of 2012, the Asylum Kickstarter campaign was successfully funded: $25,000 pledged by 810 backers. But nine months later, the backers hadn’t received their playing cards and the sponsors had gone silent.
"He has not delivered"
Enter Washington state Attorney General Bob Ferguson. His staff heard about this and now Ferguson has filed a Consumer Protection Act lawsuit. It’s on behalf of some 30 Washingtonians who contributed to this project. It targets the man behind Kickstarter campaign: Nashville-based entertainment manager Ed Nash.
“We’re going after him for a pretty simple reason," explains Ferguson. "He made a promise. He said he would deliver a product to the hundreds of folks who invested, pre-paid essentially for that product. He has not delivered on that product. He’s not communicated to those individuals.”
In a Facebook message, Ed Nash told me he can’t comment on the situation at this time. But Nash is getting some support from an artist he used to manage: Regie Hamm, a Nashville-based singer-songwriter who recently defended Nash on his podcast.
“All I can say is, from my experience with Ed, it was never anything but positive. And in my view, Ed Nash is a good man,” asserts Hamm.
In a statement, Kickstarter says, “We want every backer to have an amazing experience, and we’re frustrated when they don’t.”
Damaging the brand?
Technology market researcher, Michael Wolf, thinks the lawsuit could take some of the shine off crowdfunding.
“If I’m Kickstarter or if I’m Indiegogo or one of these crowdfunding platforms, I’d be very worried about this because I think it really does potentially damage your brand. Particularly for people who may at some point think about it," says Wolf. "They’re going to see this and say, ‘Well, what about that card game, what about the scam that happened back then.’”
As for Brad Lansford, who lost $9 to the Asylum project, he says he’s being more careful now about whom he chooses to give his money to.
“Anytime I do see a new project, if there’s any names I start Googling them, I start finding out who these people really are.”
Lansford says he feels especially bad for backers who lost more than he did. The lawsuit by the state of Washington seeks restitution for the consumers who lost their money, plus civil penalties.