Failure to deliver a deck of cards is the catalyst behind a fraud lawsuit related to crowd-funding in Washington state.
The first crowdfunding lawsuit has been filed in the United States. Crowdfunding, the practice of funding a project by raising small amounts of money from many people in order to get the project off the ground, is growing in popularity. Websites, such as Kickstarter and Indiego, provide a platform for those with a business or project idea to seek donations from others, often using social media to promote the project. However, equity fund experts warn that consumers should be aware that investing in a crowdfunded project is not without risks, as a recent lawsuit filed in Washington indicates. Deck of Cards Edward J. Polchlepek III, known as Ed Nash, posted a request for funding on Kickstarter, raising $25,146 from 810 backers in 2012 in order to produce a horror-themed deck of cards. The cards, labeled as Asylum Cards, claim that the deck would consist of 56 cards featuring horror-themed original art. The deck would only be printed once and those who invested would receive one of the decks. In addition to the cards, Polchlepek offered other similar items to those who invested. Investment Amounts According to lawsuit documents, about 31 of the 810 investors were from Washington. More than 500 people donated at least $9, more than 120 donated at least $25, while more than 150 others donated higher amounts in order to get the company off the ground. Because Polchlepek exceeded his fundraising goal on Kickstarter, he was legally responsible for sending every backer the products. A delivery date of December 2012 came and went without products being delivered, prompting many backers to post their frustration on the website’s page comment thread. Failure to Communicate After the promised delivery date passed, Polchlepek stopped communicating with both backers and Kickstarter. Once a fundraising goal is reached with the website, the funds are collected from the donors and forwarded to the person seeking the funds. Therefore, when Polchlepek exceeded his fundraising goal, which was $15,000, the investment funds were sent to him so that he could begin his project. Because he took the funds and failed to deliver the merchandise, the state determined that his actions constituted fraud. They are seeking restitution for the victims and penalties could be as high as $2,000 per violation. Attorney General Bob Ferguson said that the lawsuit is also meant to send a message that Washington will not tolerate crowdfunding theft. When the actions of another person are considered to be fraudulent resulting in financial injury to another person, a fraud lawsuit may be in order. Contact Dallas-Fort Worth lawyers at Frenkel & Frenkel to schedule a free initial consultation regarding incident where damages may have been caused or worsened by fraud. For more information on Frenkel & Frenkel, visit our website at www.FrenkelFirm.com.
