The unveiling of the crowdfunding scam on Kickstarter this week should make anyone think twice before supporting a campaign.
Visitors to the popular crowdfunding platform over the past month may have noticed a campaign by a company called Magnus Fundseeking funds to create “100% Japanese Beer Fed Kobe Beef Jerky.” Yes, that sounds incredibly delicious (it's also 100% organic if you care about that sort of thing with your jerky). The Kickstarter link even featured glowing reviews from people who claimed to have already tried the jerky.
The company only wanted $2, 374 dollars to fund its mission...the campaign raised $120,309.
The campaign was only a day away from completion. And they would have gotten away with it if not for the meddling kids behind a Kickstarter documentary. CNN reports the documentarians uncovered that the Kobe Red campaign was a fraud after delving deeper into the campaign and finding inconsistencies and a lack of information on Magnus Fund.
Had they not alerted Kickstarter, Magnus Fund would have made off with over $120'000 and left a lot of people with hurt wallets (and, most importantly, no jerky!). No word yet on if the people behind the attempted fraud have or will ever be apprehended.
While Kickstarter reviews campaign pages, it does not look into campaign-related materials outside of its own site including other Web sites or individuals surrounding a campaign. Kickstarter employs a small group of fraud monitors but relies primarily on its user community to police campaigns and alert it of terms of service violations.
While crowdfunding is quickly becoming the modern day 1849 Gold Rush for startups, it has also become notorious as a land of broken promises and delays with CNN Money reporting that over 84% of Kickstarter projects don't ship on time.
The infamous Pebble watch – the all-time most funded campaign (over $10 million) has still not shipped to backers. The estimated ship date was originally September 2012.
With more and more startups and device makers turning to sites like Kickstarter both for funds and a glimpse of their potential market size, stories like the Kobe Red fraud present a cautionary note both potential supporters who should be on the lookout for red flags and to startups themselves who may be tempted to over promise on what they can deliver and when.