The Wright Place

3 Ways to Avoid Holiday Crowdfunding Scams

The Red Flags to Watch For


Rancho Cuamonga, CA -- (SBWIRE) -- 11/17/2017 -- Crowdfunding has expanded to being a great place to invest money or help new products come to market by pre-purchasing. The Crowdfunding market saw over 87 Billion dollars exchanged in the market in 2016. This market has attracted scammers whose only purpose is to rip off with good hearts. With the Season of Charity upon us, here are a few things you can do to avoid exploitation.

Disasters and Tragedies: This is the time of year where many more people will take time to try and help their fellow man. The catastrophes get top news coverage. Local tragedies also get a lot of news coverage. Usually, at the end of the news report, they give out a Go Fund Me or similar crowdfunding web link. Not all crowdfunding campaigns are verified. Anyone can raise money for anything, and not all of them are connected to the people they claim to be helping. Some are just scams, taking advantage of a current headline. The website does not request any verification that the person has permission to crowdfund on behalf of the other person. Serval people will start fundraising and just walk off with the money, while the family of the person is completely unaware that any campaign even exists. Look for some sort of verification that this campaign is officially set up with the family's permission.

Create a dialog with the person raising money to make sure it is going to get where it's supposed to go. If you see several crowdfunding campaigns for the same thing, be wary. Verify the organization. All non-profit organizations are registered in their state. Check that the website is secure and has https://, not just HTTP.

Use a credit card to give instead of cash. If you write a check, write it to an organization, not a person.

The Justice Department's National Center for Disaster Fraud (NCDF), which was established to crack down on scams following Hurricane Katrina. Correspondence may be sent to:

National Center for Disaster Fraud
Baton Rouge, LA
E-mail: (link sends e-mail)
Call the Disaster Fraud Hotline at 866.720.5721
Fax the Disaster Fraud Hotline at 225.334.4707

Failure to Deliver:

Many times new entrepreneurs are overwhelmed with the response to their project and get thousands of more orders than they ever expected. Their lack of experience can cause them to become unable to deliver on time. This result may not be deliberate fraud, just an unsophisticated entrepreneur at work. According to a study that conducted by the University of Pennsylvania's Wharton School's Professor Ethan Mollick in 2015 found that 9% of projects on Kickstarter fail to deliver as promised to their backers. When you support an item with a pre-purchase on a crowdfunding website, the contract is between you and the seller. The crowdfunding site does not oversee the project or check to be delivery happens on time. You can check the terms or service of the sites before you give. In most cases, you are taking a chance, and it pays off. However, there is always a 9% chance that you will never get the item you "purchased." The Buyer is taking the risk. The terms on Kickstarter say "All content you access through the Services is at your own risk. You're solely responsible for any resulting damage or loss to any party." Send the creators a message and check their social media links to see if they go back to the same person. Look for actual phone numbers and other ways to contact the company should you have a problem. The website will not be able to help you recover any money lost.

Done for you crowdfunding:

Many people are too busy to get their campaign off the ground, or they just don't have the skills needed to do it. When it comes to raising money for media production, there seems to be a never-ending line of intermediaries, ready to help you raise money for your show. However, a finder who has no ownership interest in the production company itself, and is contracted to introduce passive investors to the actual owners of the production company, is acting within the definition of a "securities broker." Unless that individual finder has a bona fide securities broker license, his actions are criminal. You have to be careful. An unsuspecting producer that hires that finder can be viewed as an accomplice. The fact that so many in the film industry rely on so-called "finders" has created a widespread misconception that the rules governing securities' brokers and dealers in all other industries doesn't apply to the entertainment industry. A skilled attorney would be able to distinguish a lawful finder situation from an unlawful unlicensed broker/dealer situation, though the distinctions can often be quite subtle.

Dr. Letitia Wright is a Crowdfunding Expert in the Top 100 Crowdfunding Experts of 2017 and is available by phone for last minute interviews on crowdfunding.