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By CCN.com: The Federal Trade Commission (FTC) has launched legal action against a serial crowdfund scammer who used his ill-gotten gains to buy Bitcoin.
Douglas Monahan promised consumers a ‘high-tech’ backpack known as the iBackPack, but failed to deliver the product after raising over $800,000. After allegedly scamming Indiegogo users of $720,000, Monahan staged three more crowdfund campaigns to take his total bounty to $0.8 million.
iBackPack ‘Creator’ Shut Down by Federal Trade Commission
The investigation against Monahan was inadvertently revealed last year when an FTC agent’s private email exchange was made public. On May 6th, the FTC took action and levelled a Complaint for Permanent Injunction and Other Equitable Relief against the Texas man.
According to the FTC, rather than use $800,000 to create the iBackPack, Monahan used the funds for ‘personal purposes’ – among them, buying Bitcoin. From the complaint filed in the Southern District of Texas, May 6th:
“Defendants have used a large share of contributions for Defendant Monahan’ s own personal purposes, such as making bitcoin purchases and ATM withdrawals and paying off personal credit cards; for marketing efforts to raise additional funds from consumers; and for other business ventures.”
Monahan’s victims also claim that their personal data was sold, owing to the unexpected marketing communications they all received soon afterwards. This is only the second time in history that the FTC has gone after a crowdfunder. In 2015, Erik Chevalier raised $120,000 for a board game, and then sold off contributors’ personal data after failing to deliver the product.
Crowdfund Hopping: Indiegogo to Kickstarter and Back Again
After failing to produce anything from the $720,000 he raised on Indiegogo, Monahan jumped over to Kickstarter and started marketing the iBackPack 2.0. From this campaign, he raised a further $76,000, all while his original backers were still awaiting their products.
He then launched another two campaigns back on Indiegogo and siphoned a further $11,000 from gullible investors.
The Indiegogo page for the iBackPack still exists, and has been inundated with nearly 4,000 comments from disgruntled patrons. One recent comment notes:
“I love that the FTC is suing you, and I hope they make Indiegogo just as guilty for letting this continue without protecting their customers.”
Gullible Victims? A Parallel Between Bitcoin and Crowdfund Investing?
Not a week goes by where the Bitcoin isn’t lambasted by critics in one way or another. This week it was Warren Buffet who dismissed Bitcoin as nothing more than a gambling device.
Cryptocurrency adherents are often characterized as gullible victims of an obvious bubble, but if $800,000 is being thrown away on the ‘iBackPack’ then we clearly have other problems to worry about. The ‘high-tech’ iBackPack appears to be nothing more than a bag with a charger and some USB ports inside it.
The parallels between Kickstarter promises and ICO pitches are obvious here. Just like with ICOs, crowdfunders do not have to guarantee that their project will even materialize. As Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said:
“If you raise money by crowdfunding, you don’t have to guarantee that your idea will work. But you do have to use the money to work on your idea—or expect to hear from the FTC.”
The cryptocurrency space would probably benefit from something similar.
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