buyer beware

Kickstarter almost enabled a $120,000 fraud, and it’s not the first

June 14, 2013
June 14, 2013
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The Kickstarter campaign for Kobe Red beef jerky was yanked just minutes before thousands of backers lost their moneyKickstarter

Kickstarter just narrowly averted what would have been the biggest definitive fraud in the crowdfunding site’s history. It shut down the Kobe Red project, which promised to deliver mouthwatering beef jerky made from Japanese cows fed on 100% organic feed and treated to beer and massages (we’re not making this up)—just an hour before scammers would have successfully made off with $120,309 from the project’s 3,252 backers.

Rather than vetting projects on its own, Kickstarter relies on its own users to report suspicious campaigns. Kobe Red was flagged by, among others, a group of filmmakers who are working on a documentary about Kickstarter.

Here’s a brief video explaining what those documentarians discovered. It included fake testimonials from fake taste-testers, and the usual litany of breathless, credulous media coverage that accompanies every Kickstarter launch for a project that could plausibly appeal to the core audience of the online community Reddit.

It’s a problem Kickstarter faces as it grows: The site’s laissez-faire attitude, which has allowed an incredibly diverse range of projects to debut there, also makes it potentially attractive to fraudsters. That said, Kickstarter has launched 102,527 projects to date—with 43,193 reaching the funding stage, when backers’ credit cards are charged—and the amount of fraud appears, anecdotally at least, to be quite small.

It can also be hard to tell the difference between a fraud and a well-intentioned project whose creators just never got their act together. The most notorious such example was ZionEyez, which claimed to stream video directly from a pair of eyeglasses to a person’s Facebook stream. The project netted $343,415 in 2011 and its backers occasionally pop up again, but with nothing to show for all that money. Other maybe-scams include a role-playing video game that was shut down before it finished its funding phase, aluminum dice that already existed and which someone hoped to resell through Kickstarter, and a board game whose creator simply disappeared after raising $22,559.

Kickstarter’s position has always been that it’s up to a project’s would-be backers to evaluate its claims. Kickstarter explicitly presents itself as a site for a new kind of arts patronage, rather than a store. Its board members have said that the site simply cannot vet all the projects that people post, and have argued that in general the amounts backers lose are small. The site’s FAQ includes an “accountability” section packed to the brim with caveat emptors about what can happen if a project’s creators don’t follow through on their promises. I asked Kickstarter for comment on this story, and a spokesperson responded that they never comment on the reasons why individual projects are suspended.

However, anyone can make a fraud report, which goes to a “Manager of Trust and Safety.” Kickstarter would not comment on the nature or the existence of this position; the only evidence it exists is that there is currently a job posting for it. Perhaps Kickstarter worries that discussing the position might give the impression that the site’s projects are more vetted than they are, or that doing so is to acknowledge some kind of responsibility for whatever fraud does get through.

Either way, the site may be realizing that, with the kinds of fake testimonials, fawning press coverage and slick promotional video that a project like Kobe Red had, putting all the responsibility for evaluating frauds entirely on a project’s would-be backers just doesn’t cut it any more. Luckily for Kickstarter’s reputation, Kobe Red was shut down in time—but only just.

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