Crowdfunding Scams are fraudulent sites and platforms collecting money from users with ill-intention. They either run away with the funds or use them for the wrong purposes.
Crowdfunding is the modern way of helping a startup set off from the ground via contributing money in exchange for a share/gift.
Many people could have known Bill Gates before Microsoft was big or would be friends with today’s correspondent Steve Jobs.
Crowdfunding is a way to aid a project you believe in and receive rewards for that support. But even if the project is close to your heart, the people running it may not be keen on actually working for the cause. Some crooks can take your money and produce nothing from it, no project, and no reward.
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What is Crowdfunding?
People who call themselves “creators,” ask people to fund projects through websites like Indiegogo or Kickstarter. In exchange for rewards offered to contributors, these creators are making a product or a share in the company.
It is a money procuring strategy that raises small funds from numerous people through an online platform. It is raising money from multiple people to fund a venture instead of a singular financial institution.
What are Crowdfunding Scams?
Crowdfunding is an excellent way to help people but also verify the project is only as good as the people creating it. Unfortunately, some dishonest creators can take your money and do nothing – no projects, no rewards, and no products.
Triton, a company based in America, claimed to invent a device that helps people breathe underwater. They set up a crowdfunding page for mass production. The company received $850,000 in a week, but Triton had duped people with an invention that only one can see in a sci-fi movie. Triton vanished with the money.
A couple in New Jersey played along a homeless veteran from Philadelphia to start a false GoFundMe crowdfund page. The couple stated that using his last $20, the veteran bought fuel for the wife after she was stranded on Interstate 95. The story was perfect, with an emotional balance in it to get people to believe the crowdfunding scam and donate their money. Within a month, the couple made $40,000 and fled away with the money.
Is Crowdfunding a Scam or Legit?
Behind most crowdfunding sites are crooks who aim to get to your money. To know if the platform is a scam or legit, you will have to look quite closely.
Crowdfunding postings with photos are not always legit. They don’t always confirm the connection with the victims. They use these photos without the permission of the family.
If you are funding a project, know how the funds will help pay for it or how the funds will be used. If the description is vague, do not pay for the project. Instead, check various resources and review recent announcements from government agencies and other credible institutions that relay how they will assist victims.
Look for the safest option. If possible, give to crowdfunding postings you know personally. If not, find postings that are going to be forwarded and distributed by an established charitable organization. You can check out the organization, and third-party involvement can give you further oversight in the organization so you don’t end up with Crowdfunding scams.
How does Crowdfunding Scam Work?
In Crowdfunding, “creators” ask for small funds from many people to fund projects through websites like Kickstarter or Indiegogo. In exchange, these creators offer rewards to contributors; it can be a product that the creators are making. It all sounds impressive, but it is not when the creators create only profit for themselves.
Many people approach to make financial contributions to a business project, mainly through an online platform.
For investors to assess their idea of Crowdfunding, they need to conjure up a proper plan with,
- A detailed account of the product or service
- The exact amount needed, and why
- The Crowdfunding type
- Investment round’s duration
After that, they need to follow a process,
Project assessment– The creators submit their idea, the crowdfunding platform will assess the platform’s viability for their audience.
Publication– If the project gets approved, it gets published on the platform for the allotted time.
Promotion– Now they spread the word. They promote their venture in the media, on social media, etc., to boost their fundings.
Project closure– After the allotted time is up, the final amount is tallied up.
How to Avoid Crowdfunding Scams?
To know whether a crowdfunding project is sketchy or not, you need to look at the project you are about to choose carefully.
Go by these guidelines to not end up funding Crowdfunding scams,
Research, research, and research some more.
Research the creator behind the campaign and if their name appears in other scams. See if the project is too challenging to go on as a solo project. Suppose the creator has the expertise to fulfill the task. If there are any red flags, you need to back out.
See if the project is realistic. At times, many accounts are set by a single individual with an unrealistic goal. The idea is entirely impractical—bid goodbye to these crowdfunding campaigns.
Do not let your emotions cloud your judgments when it comes to donations. Verify the truth of the need claimed. Scammers are very good at faking illnesses and accidents to prey on kind donors.
Starting a crowdfunding campaign or donating to one is not wrong and many of these are also honest, but a few greedy ones ruin it for the others. Do your research and make sure that you are comfortable before hitting the “send” on your donation.
What to do if you have lost your funds to Crowdfunding Scams?
Crowdfunding is a good thing. It helps people who need help, but many people of ill fate want to take advantage of the generous people and make it easy for them. Financial Fund Recovery says a person should verify at the least twice before donating to a crowdfunding project.