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First-of-a-kind Kickstarter lawsuit highlights risks of crowd funding

First-of-a-kind Kickstarter lawsuit highlights risks of crowd funding

An attorney general alleges that a company raised $25,000 for a playing card set, but has not delivered the rewards

The attorney general for the state of Washington has filed a lawsuit against a company that raised more than US$25,000 on Kickstarter but allegedly didn't deliver the playing-card deck it promised its crowd-funding investors.

Washington Attorney General Bob Ferguson filed what's believed to be the nation's first consumer-protection lawsuit involving crowd funding on Thursday against Altius Management, a Tennessee entertainment and artist management firm, and owner Edward Polchlepek III, also known as Ed Nash.

The company's Kickstarter campaign, funded in October 2012, raised funds to create a set of Asylum playing cards, and the campaign promised the retro-horror-themed playing cards, posters and signed sketches from a Serbian artist as rewards.

The Kickstarter campaign raised money from 810 backers and promised rewards with an estimated delivery date of December 2012. The project hasn't been completed and none of the backers has received any rewards, Ferguson alleged in court documents. The company has not communicated with backers since last July, he alleged.

"Consumers need to be aware that crowd funding is not without risk," Ferguson said in a statement. "This lawsuit sends a clear message to people seeking the public's money: Washington state will not tolerate crowd-funding theft."

The project's comments page on Kickstarter has multiple complaints from backers. "I've asked for a refund multiple times, he refuses to answer any emails," one backer wrote in January.

Polchlepek didn't immediately return a phone call seeking comment on the lawsuit. The company did not immediately return a message sent through its website's contact form.

Kickstarter, on a FAQ page, said its terms of use requires creators to fulfill all rewards of their projects or refund backers. Backers have a legal recourse if creators don't fulfill their promises, the site said.

"If the problems are severe enough that the creator can't fulfill their project, creators need to find a resolution," according to the FAQ. "Steps could include offering refunds, detailing exactly how funds were used, and other actions to satisfy backers."

The complaint, filed in King County Superior Court, seeks restitution for consumers and as much as $2,000 per violation of the state's Consumer Protection Act.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's email address is grant_gross@idg.com.

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Tags Internet-based applications and servicesKing County Superior CourtKickstarterCivil lawsuitslegalBob Fergusongovernmentsocial mediainternetAltius ManagementEdward Polchlepek III

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