For those who don’t know, crowdfunding sites like Kickstarter and Indiegogo are a convenient way to find a slew of internet strangers willing to invest their own money, in sums large or tiny, into whatever entrepreneurial endeavor you pitch them. Some might ask for help with brilliant projects, but still others ask for you to pay for potato salad.
Recently, the Indiegogo campaign for the Kreyos smartwatch pulled in a total of $1.5 million in donations to help the founders conceive a waterproof, voice-activated watch. Their original goal was to raise only $100,000, so they must have used all that extra cash to really make one hell of a watch, right?
Nope. Since the campaign ended, the project founders haven’t delivered their product, refused refunds, and have taken the money for themselves. Irate backers have flooded the campaign’s comments to complain that they never received their watches or else were sent near-worthless watches nothing like what the campaign promised.
Basically, their money has been utterly wasted. But where did that money go?
Towards a new Ferrari for Kreyos cofounder Steve Tan. Tan posted a photo of himself posing with a brand new red Ferrari on Facebook. Shortly after, the photo was allegedly pulled off the page, and Tan’s Facebook privacy settings tightened and the page scrubbed clean of any association with Kreyos.
Unfortunately, schemes like this are a consistent risk on crowdfunding sites. As Yahoo notes, Indiegogo has a very open platform wherein anyone can create a campaign without administrative oversight, unlike Kickstarter which often rejects campaigns they don’t like.
Campaigns and contributions that have been flagged by our fraud detection system go through a thorough review.
Indiegogo’s openness policies may seem sound enough, but it often amounts to a lackadaisical attitude towards fraud on their website, dismissing any complaints as not their problem.
While other “scampaigns” claim they still have a product on the way, Kreyos might be the first where the founders so blatantly abandoned a project to make off with the money. Of course, there’s still the possibility that the Kreyos founders will pull through with their project — not likely, but possible.
The more significant question is how scams like this will affect the future of internet crowdfunding, a new form of investment that, at its best, can help penniless entrepreneurs realize their dreams. But can such semi-miracles be accomplished while there are scammers and corporate powers abusing the sites for their own, less-than-savory purposes?