asylumplayingcardsIf you raise money via Kickstarter and don’t deliver products you promised backers, the government will come after you.

In what is the first consumer protection lawsuit involving crowdfunding, Washington State Attorney General Bob Ferguson today filed a suit against Ed Nash and his Nashville, Tenn.-based company, Altius Management.

Back in October 2012, Nash raised $25,146 from 810 backers — including at least 31 from Washington — for a playing card game called Asylum designed by a Serbian artist and managed by Nash. The campaign exceeded its funding goal of $15,000, meaning Nash was legally responsible for sending every backer the products they paid for.

But as the estimated delivery date of December 2012 passed, customers never received their Asylum product. In the months following, angry backers voiced their frustration on the ongoing Kickstarter page comment thread.

Ed Nash.
Ed Nash

“Almost a year and no updates,” one backer wrote. “Ed Nash is in hiding.”

“This IS pathetic,” another said. “Kickstarter dont care at all same as Ed he dont care he has his money.”

According to the lawsuit, both Nash and Altius have not communicated with the backers since July 2013. The Attorney General’s office is seeking restitution for consumers, as much as $2,000 per violation of the Consumer Protection Act in civil penalties, and money to cover the state’s costs and attorneys’ fees.

“Consumers need to be aware that crowdfunding is not without risk,” Ferguson said in a statement. “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.”

Joe Wallin, an attorney with Seattle-based Davis Wright Tremaine, said he’s not surprised by the Attorney General’s actions.

kickstarter“If people mislead and defraud people, they can expect the government to take action,” Wallin said.

Kickstarter notes that the company “does not guarantee projects or investigate a creator’s ability to complete their project.” However, its Terms of Use page does note the legal obligation of people to deliver their product if funded. From the FAQ:

Is a creator legally obligated to fulfill the promises of their project?

Yes. Kickstarter’s Terms of Use require creators to fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill. (This is what creators see before they launch.) This information can serve as a basis for legal recourse if a creator doesn’t fulfill their promises. We hope that backers will consider using this provision only in cases where they feel that a creator has not made a good faith effort to complete the project and fulfill.

We’ve reached out to Kickstarter for further comments.

The Altius Management website is blank, though some subpages are still online. The company’s LinkedIn page describes it as a “full-service entertainment and artist management firm.” Nash, meanwhile, is still listed as the president of the company on his LinkedIn.

It doesn’t appear that Nash is “hiding,” as one Kickstarter backer noted. His Facebook and Instagram accounts have been active.

Nash describes himself as an “experienced veteran of the music industry,” on his About.Me page.

“Now in his early 30’s, Ed is clearly outperforming his peers — as President of Altius Management, Ed represents a select roster of clients, now only in music, but in film, television, and comedy,” the page notes.

Check out the full lawsuit here:

Update, 5/2: Here’s the statement Kickstarter shared with us:

“Tens of thousands of incredible projects have been brought to life through Kickstarter. We want every backer to have an amazing experience, and we’re frustrated when they don’t. We hope this process brings resolution and clarity to the backers of this project.”

Update, 5/4: We reached out to the Washington State Attorney General’s office, and here’s the statement they gave us:

“This is a new frontier. We hope this sends a message to other potential project creators to take their responsibilities seriously.  We look forward to bringing more cases, if necessary, to protect consumers.”

Comments

  • Salty_Swede

    In other kickstarter news….

    “They need to be honest and announce that certain opinions and ideas are not welcome,” says independent producer Phelim McAleer, who has now placed the censorship message on a billboard which went up a half-mile from Kickstarter’s New York headquarters.

    http://www.hollywoodreporter.com/news/filmmaker-accuses-kickstarter-censoring-gosnell-700566

  • Krautgeek

    That’s interesting. The state or Oregon did NOT take any action last year after Portland based game company “The Forking Path” used Kickstarter raised over $120,00.00 for a board-game (a Monopoly parody) and delivered absolutely nothing. The CEO, Erik Chevalier, has given no explanation about the whereabouts of the raised funds. The entire drama can be still found on the original Kickstarter campaign page: https://www.kickstarter.com/projects/forkingpath/the-doom-that-came-to-atlantic-city/

    • Joseph Slabaugh

      $120,00.00? Is that 120 thousand or 12 thousand?

      • Krautgeek

        That’s 120 tousand dollars. To be more precise: $122,874 from 1246 backers. For the production of a 100% developed board game. Erik Chevalier got the money June 2012. The product was supposed to be delivered Christmas 2012. At first backers were told there were legal issues with Hasbro. Then supposedly delays because of issues with producers in China. Then, summer 2013, the project was cancelled without any explanations. A post-mortem was promised but never released.
        The story had a bit of a happy end: “The Forking Path” had to give back the rights and the game company Cryptozoic Entertainment stepped in. They produced the game (http://www.cryptozoic.com/games/doom-came-atlantic-city). Once the game was made Cryptozoic Entertainment gave each backer a free game…even though they (or the developers) never saw a penny of that Kickstarter money! Really generous. But the $120,000 Erik Chevalier took seem to be gone.

        • Joseph Slabaugh

          PAGE NOT FOUND
          The requested page “/games/doom-came-atlantic-city)” could not be found.

          • Joseph Slabaugh
          • Richard Kindel

            Just by perusing the links shown, it was probably a copyright violation on the project’s part. The cthulhu board game pretty much used the monopoly board (even the same streets: boardwald, park avenue). It was probably successfully canned by Hasbro (who owns the monopoly copyright) …. I imagine that that 125K raised by the KS backers (and then some) was probably lost to legal fees. This would still be the KS project’s fault for violating copyrights, they should’ve known better.

          • Joseph Slabaugh

            Krautgeek brought the case up, not me.

          • Krautgeek

            When Hasbro interjected the designers immediately re-designed the artwork in question. The work was done to the full satisfaction of Hasbro and they dropped it. No legal fees & the designers stated they did everything without using Kickstarter funds. At the end of 2012 backers were informed that all legal issues with Hasbro were resolved and the game was “scheduled for a Q1 2013 release”.

  • Soap Box Rocket

    I would suggest that GeekWire look into this Kickstarter: https://www.kickstarter.com/projects/michaellaine/space-elevator-science-climb-to-the-sky-a-tethered They raised a ton of money and haven’t delvered anything, not only that but they are located inside WA and the founder has had leagal issues in the past.

    • Zachary Marks

      rofl the dude is talking about building a space elevator on the moon, and people backed him…gee, no wonder he didnt deliver :P

    • J

      What the hell. Why would anyone … how are people giving … GAAAGH

      ::BRAIN EXPLODES::

  • Fabio C Barrionuevo da Luz

    Kickstarter is not the only one with this problem. see:
    https://www.indiegogo.com/projects/be-maker-kit-plus-free-lessons-on-electronics-from-zero-to-internet-of-things#comments

    I bought this perk. And it’s been three months the maximum period for shipment, and no one gives a pausivel answer about what is the real status of the project and because of such a lack of information

  • Fabio C Barrionuevo da Luz

    Kickstarter is not the only one with this problem. On Indiegogo, 4299 funders = $248,116 USD. I bought this perk. And it’s been three months the maximum period for shipment, and no one gives a pausivel answer about what is the real status of the project and because of such a lack of information.

    https://www.indiegogo.com/projects/be-maker-kit-plus-free-lessons-on-electronics-from-zero-to-internet-of-things#comments

  • Ray S

    I’ve been burned on Kickstarter twice (one was from 2011 and they have still not delivered) and decided to never help fund another project. If you want to raise money for an idea you have, quit begging and asking people, do it the old fashioned way, work your ass off until you can do it on your own. If not, then get a loan and work your ass to pay it off. Kickstarter is full of beggers. Unemployed starving artists and musicians who hope to get some kind of income going so they can continue to enjoy their “hobbies”.

    • Richard Kindel

      I posted this before in another thread, I still think it’s relevant:

      People that post projects on Kickstarter need to fulfill their obligations if the project gets funded PERIOD!

      Otherwise it’s just going to promote the paranoia above: people who get burned by not receiving their product are going to avoid kickstarter and pass along their negative word-of-mouth experience, further reducing the pool of potential backers. Whatever project are posted need to be 100% complete BEFORE the project is posted on kickstarter (that includes art, programming, playtesting, whatever). If the project cannot be done without receiving money in advance (i.e to pay for artists, programmers, etc) then it should NOT be posted to begin with (don’t start the project to begin with .. you’re just going to disappoint backers & make it hard for everyone else). Only the final manufacturing costs should be needed (to be raised) by backers. I have a KS project that I plan on posting this year that I’ve been working on for over 2 years, so KS projects failing their backers with non-delivery of their promised goods is significantly important to me as a future project poster. I fully plan on having my project 100% completed by the time I post it on KS (only lacking the final manufacturing & delivery time).

      BTW: I don’t see kickstarter as a platform to get “ideas” funded. “Ideas” are a dime a dozen, and “ideas” frequently never come to fruition. I’ve seen plenty of great computer game “ideas” that have become nothing but vaporware (Stars! supernova comes to mind). People that actually donate money to back a real “project” deserve better than that. I have over a dozen board game ideas, most are just brainstorms at this stage, a couple are 30% to 40% done, one is closer to 60%, none of which I plan to post on KS until the project has been completely done & playtested (only needing that additional backer funding for production). Now, I’ll back projects, but certainly not “ideas.”

  • Jack Frazee

    Another one, funded in JULY 2012 at $135,000, that seems to have no chance of ever being completed:
    https://www.kickstarter.com/projects/669350010/ringbow-next-generation-gaming-accessory

    I really hope something comes out of this, for more bad projects.

    • Richard Kindel

      It looks to me like this particular project has already been developed & is working, based on the video. I only see the manufacturing time perhaps eating up a year or more. That’s not a problem to me, based on the amount of engineering required to manufacture the product.

      This is different from a project that is just in the “idea” stage, since it seems pretty well already completed to me (except for only the final manufacturing/production). I don’t see a problem here, it’s the other projects that are posted which haven’t even been started. Those in which the project needs money in advance to pay for artists, programmers, designers, engineers, etc.. If one can’t work for free, then don’t post the project to begin with. After all, there’s no guarantee that *any* project will be funded, that’s the risk you run with KS. If one can’t afford to do the project in their spare time, and risk it not getting funded, then don’t do it at all to begin with. ;)

      All projects that do get funded need to fulfill their obligations to their backers, PERIOD!!

      • Dan

        What you say is true, however, it is a contractual situation. The people not fulfilling their contracts are the ones who should be punished not the industry itself. The state will destroy all potential of the platforms if they get involved further than enforcement of contract.

  • Thiago

    That would seem to be a risk of things like kickstarter. Fortunately, if you steal money from a large group of people, the odds go up that at least one of those people can find you and sue you. Here’s hoping they got some good attorneys to do it, too. Thiago | http://www.lynnjackson.com/attorney-profiles/

  • Justin A Mitchell

    Kickscammed.com was tracking this long ago

  • Dan

    Wait, handing your money over to another has risk! You don’t say? This is why we can’t have nice things. People believe that simply because they lost money that there was fraud involved. You want to know why our economy has stagnated? Because risk has become a dirty word. Get over it.

  • Dami

    Hi, I’m doing a research on this issue (delivery delay/failure) for my postgraduate dissertation. There is little or no research yet on how these delays affect Backers or what impact it has on our funding behaviour. So if you have ever backed a project on Kickstarter, Indiegogo or any similar platform where you expected to receive a reward(whether it was delayed or not), then please fill out my survey (should take about 10mins)- https://www.esurveycreator.com/s/c0c66f7 and share with other Backers if you can. Thanks a lot :)

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