Brainstorming graphic showing ideas and money and crowdfunding Zachary Hiller Law Houston, TX

Crowdfunding is an increasingly popular method of raising money online from the mass market. It only started to take a significant hold of the public around 2008, and has grown more popular each year.

Many crowdfunding websites have helped countless groups of people kick off fantastic ideas, fund causes, and get start-ups rolling. While crowdfunding can be a quick monetary gain for those in need, it can have many legal issues and downfalls, if not executed properly.

One of the problems with crowdfunding as a way to start or keep alive a business, is it comes with the risk of empty promises, and angry investors. While bogus campaigns are usually noticed by admins on crowd funding sites, some slip through the cracks.

Recently a court set an example for unfulfilled Kickstarter crowd funding projects, as it ruled that a project starter on the particular website who didn’t fulfill their orders must issue refunds to the investors. Although the ruling only impacts backers of the unfulfilled project inhabiting in the court’s district of Washington, the precedent and the judge both urge other investors who have been scammed by crowdfunding projects to turn to their councils and file complaints against the deceitful companies.

The case brought against Edward J. Polchlopek III, was based on the Asylum Playing Cards Kickstarter campaign. Washington attorney general Bob Ferguson filed suit against Polchlopek III of Altius Management, who failed to deliver rewards to investors of his Asylum Playing Card Kickstarter Project, which was funded through the site in October 2012. The campaign promised a printed deck of cards and other items that were used as incentives to entice people to donate to the project. These items were promised to get to backers by December 2013, but by June 2015 only some had received their rewards. Attorney Ferguson ruled in July that Altius Management, the company behind Asylum Playing Card, should refund the 31 backers in Washington district and pay all the fees associated with the lawsuit, meaning Altius Management would have to pay $54,851. Anybody who starts a Kickstarter campaign should take notice of this case Failed campaigns always tend to aggravate investors and are newsworthy but this may be the first time that the law has acted so strongly on the proceedings.

What are your thoughts on the situation? Should Kickstarters and other crowd funders be careful with their campaigns from now on?

Remember before you start an online campaign to raise funds, talk to an experienced attorney. While these crowd funding sites may seem like a great way to earn quick backers, the firm of Zachary Hiller will help you navigate this and any other legal pitfalls or challenges of raising capital for your business.

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