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Washington Attorney General Files Suit Against Crowdfunded Project

Case marks the first enforcement action against a crowdfunded project that has not delivered the goods promised.

On April 30, 2014, the Washington State Attorney General filed a consumer protection lawsuit involving crowdfunding. Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. One of the largest online companies used for crowdfunding is 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 addition, Kickstarter’s terms of use make clear that companies are legally obligated to fulfill the promised rewards or provide consumer refunds.

The AG’s complaint alleges that Altius Management, who ran the “Asylum Playing Cards” Kickstarter, in which consumers were asked to fund a project to print and market a deck of cards and other items featuring artwork created by a Serbian artist, failed to deliver playing cards and other rewards promised to those consumers who pledged money. The Asylum Playing Cards campaign raised $25,146 from 810 backers.

Project backers were promised the playing cards and other rewards with an estimated delivery date of December 2012. The project has not been completed and none of the backers have received any of the promised items or any refunds. Altius has not communicated with its backers since July 2013 and the estimated delivery date for the playing cards was December 2012.

This case serves as an important reminder that the traditional rules of advertising law  -  making sure you can deliver the promised good or provide a full refund – apply to new technologies and platforms such as crowdfunding.

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