March 10, 2016
Carson City, NV – Today, Nevada Attorney General Adam Paul Laxalt encourages consumers to be diligent before contributing any money to projects or causes featured on crowdfunding websites such as Kickstarter, GoFundMe and Indiegogo. Crowdfunding websites are sites that endeavor to fund projects or ventures by raising monetary contributions from a large number of people. Consumers using these crowdfunding platforms are at risk of falling victim to charity scams or suffering financial losses from failed projects.
“Crowdfunding provides opportunities for consumers to support charitable causes or become actively involved in bringing new products to the market,” said Laxalt. “It is, however, important for Nevadans to make informed decisions before contributing their money to avoid suffering possible losses from failed projects and phony causes.”
Most popular crowdfunding platforms are either donation-based or rewards-based. Both involve different risks that consumers should be aware of before contributing. Consumers using donation-based crowdfunding, such as GoFundMe, are vulnerable to fraudulent charity scams soliciting donations for phony causes that benefit scammers.
To ensure your contributions are benefiting the causes and individuals you would like to assist, individuals are encouraged to:
- Conduct preliminary research before making a donation. Donate only to familiar and trusted users.
- Review the crowdfunding site and become familiar with the criteria used to certify or verify a donation campaign. Be aware of donating to any campaigns that have not been certified or verified according to the platform’s standards.
- Only use the platform’s designated payment options when submitting donations. Avoid using links that lead to alternate payment methods and meeting with individuals trying to arrange for an alternate payment method.
- When in doubt, avoid making a donation.
Consumers using rewards-based crowdfunding, such as Kickstarter or Indiegogo, are vulnerable to financial risks if projects fail or are exposed as fraudulent. Consumers backing these projects often expect to receive rewards such as a free or discounted copy of the product from the project’s creator, in return for their financial support. However, if a project creator encounters unexpected creative, administrative or financial problems that prevent final production, backers may not receive their expected rewards. Consumers can minimize this risk by taking the following steps:
- Conduct research on the project creator. Determine whether he or she has successfully completed other crowdfunded projects, and whether the creator has been the subject of any community forum “rip-off” complaints.
- Select a project based on personal interest rather than expectation. If the lure of a reward is balanced by personal interest in the creative idea, the backer may be less frustrated if the project fails.
- Budget your pledge amount. Avoid pledging a contribution for an amount that you cannot afford to lose.
- Stay informed. Before pledging, review all of the crowdfunding site’s terms and conditions, especially those that govern canceling a pledge or your right to a refund. Once you commit to backing a project, look for updates about the project’s development and any unexpected delays.
If you have information about a fraudulent crowdfunding campaign or suspect you have fallen victim to a crowdfunding scam, file a complaint with our Office here.