GlobalNews | James Armstrong | Apr 13, 2015

TORONTO – Crowdfunding websites like Kickstarter, Indiegogo, and GoFundme minimize risk and protect their users from fraud, in part, by relying on their users to find it themselves.

Frauds can happen – a recent post by the unidentified creator of a fundraiser for a South Carolina officer accused of shooting Walter Scott alleges the fundraiser was a fraud.

This person claimed in a Facebook post that the campaign was created to raise money for their car payments.

“Well the jig is up; IndieGoGo pulled my support and returned all donations. I admit I was trolling and was looking to get enough donations to pay my car off,” the person wrote on the Michael T. Slager Support Fund Facebook page.

“I never promised a single dime to Michael Slager and was careful not to say that I was. I was, as a gesture of fair play, going to seek a way to get him some small token of the donations (I was, of course, using his name and likeness).”

The owner of the Facebook page has not responded to requests for comment.

Fraudulent campaigns do happen but they are rare. A World Bank report on crowdfunding states “no successful fraud has been perpetrated through pledge-based crowdfunding platforms.”

The report goes on to say would-be fraudsters were thwarted by “the transparency inherent in crowdfunding.” Or – the large crowd of possible investors vetted the projects themselves.

“The crowd has been very successful at uncovering suspect campaigns,” Craig Asano, the executive director of the National Crowdfunding Association of Canada said in an interview.

Websites like Kickstarter rely in part on their users to vet the campaigns. The Michael T. Slager Support Fund reportedly only received about $1,100 in large part because of the criticism it faced.

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• In Crowdfunding, Who is Responsible for Preventing Fraud?
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Asano said would-be investors should educate themselves about not only the project – making sure it’s legitimate, and realistic – but also the website, making sure it uses accepted methods of payment.

But crowdfunding sites also have their own means of verifying legitimate campaigns and pulling down campaigns deemed unrealistic or illegitimate.

Indiegogo has an algorithm which seeks out fraudulent claims and employs a Trust & Safety Team which combs the site for bad projects, getting rid of anything that doesn’t meet the site’s terms or is deemed to be potentially fraudulent.

Kickstarter doesn’t transfer any money until the project is completely funded. This, according to a spokesperson, helps keep people from being tricked into funding a fake project. But Kickstarter also, in part, relies on the community to vet the project.

“If I pledge to your project on day one and you turn out to be a bad actor, our Integrity Team has 60 days to look into the project, field user input,” Justin Kazmark, a spokesperson for Kickstarter said in a statement.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country.  NCFA Canada provides education, research, leadership, support and networking opportunities to over 950+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada.  Learn more About Us or visit ncfacanada.org.