Consumers who financially backed a failed crowdfunding project are finally getting some backing of their own. Washington State Attorney General Bob Ferguson filed the first consumer protection lawsuit in the nation involving crowdfunding.
Crowdfunding is a way for people to secure financing for their initiatives directly from a large pool of backers who generally provide small amounts of financial support. Crowdfunding campaigns benefit a broad range of initiatives from movie-making to high-tech gadgets to charitable giving.
The AGO lawsuit is against Edward J. Polchlepek III, otherwise known as Ed Nash, and his company, Altius Management, who ran the “Asylum Playing Cards” crowdfunding campaign in 2012 through a crowdfunding service called Kickstarter. Under Kickstarter’s terms of use, consumers who back a Kickstarter project make a financial pledge in exchange for an agreed upon product or “reward” that the project is legally required to deliver.
In this case, consumers pledged funds in exchange for decks of playing cards featuring a retro-horror theme and other similar items. The AGO alleges Polchlepek and Altius took consumer money and failed to deliver the promised playing cards and other rewards to these consumers.
This case marks the first state enforcement action against a crowdfunded project that hasn’t delivered the goods promised to consumers.
“Consumers need to be aware that crowdfunding is not without risk,” said Ferguson. “This lawsuit sends a clear message to people seeking the public’s money: Washington state will not tolerate crowdfunding theft. The Attorney General’s Office will hold those accountable who don’t play by the rules.”
The Asylum Playing Cards campaign raised $25,146 from 810 backers, including at least 31 from Washington state in 2012. The campaign involved a project to print and market a deck of cards and other items featuring artwork created by a Serbian artist.
Project backers were promised the playing cards and other rewards with an estimated delivery date of December 2012. To date, the project has not been completed and none of the backers have received any of the promised items or any refunds. Additionally, the company has not communicated with its backers since July 2013.
Kickstarter’s terms of use make clear that companies are legally obligated to fulfill the promised rewards or provide consumer refunds.
The complaint against Altius Management and Edward J. Polchlopek III, filed in King County Superior Court, seeks:
• Restitution for consumers;
• As much as $2,000 per violation of the Consumer Protection Act in civil penalties; and
• The state’s costs and attorneys’ fees for bringing the suit.
The state’s case is being handled by Assistant Attorney General Jake Bernstein.
A copy of the complaint filed today can be found online at the attorney general‘s website.
