6 Crowdfunding and Fundraising Scams That You Should Know
Crowdfunding projects and fundraisers have an inherent problem – you never truly know what will happen to your funds once it changes hands. For some of these funders, these projects below must have left a very sour taste in their mouths.
Triton Breathing Gills
Image source: CNBC
Ever wanted to breathe underwater? The Triton Breathing Gill promised a way for you to do just that. Strap it on, and the artificial gills would filter oxygen out from the water and deliver it to the user like a scuba gear.
The creators had claimed that their artificial gill technology would allow users to breathe underwater for up to 45 minutes just by extracting oxygen from water drawn through a porous filter. Several experts were not convinced. One such expert, Stephan Whelan, calculated that water had to be forced through the filter at a rate of at least five litres every 15 seconds. This feat required a pump far bigger than the Triton itself with currently available technology – and an appropriate power source much better than anything else on the market. And then there was the issue of storing and distributing the collected oxygen into the user’s lungs.
Skarp Laser Razor
Image source: Indiegogo
Initially on Kickstarter, it was booted on doubts whether the product actually worked. Unfazed, they moved the project to Indiegogo, where it remains.
The razor was slated to ship by March 2016, however despite the creators posting updates about securing patents, obtaining infrastructure and nurturing talents, the future has yet to hit the market.
Skully AR-1 Helmet
Image Source: skully.com
Riding on a motorcycle is much more dangerous than driving a car, as statistics prove. But the Skully AR-1 Helmet sought to change that. Marketed as “the first motorcycle helmet with a built-in computer and a rear view camera”, it claimed to be able to eliminate all of a motorcyclist’s blind spots.
The Skully raised $15 million USD of funds, including $2.5 million raised through an Indiegogo crowdfunding campaign. (It later received $11 million in Series A funding after the campaign.) However, the world never got to find out whether the helmet worked. In mid-July, the brothers who founded the project were ejected from the company by the board of directors, and the company shuttered soon after.
It soon emerged that a former bookkeeper, Isabelle Faithauer, had filed a lawsuit against the co-founders, accusing them of using the funds as a “personal piggy-bank”. Among the claimed expenses were vacations to Hawaii, personal rent for their apartments, trips to competitions in Las Vegas, and a visit to a strip club. The lawsuit additionally stated that she was made to conceal the true nature of expenses.
What is left of this campaign is a notice on Indiegogo indicating that backers seeking their money back needed to go through bankruptcy courts to recover any money. However, this one situation may have a happy ending. Ivan Contreras, the CEO of boutique motorcycle brand GasGas, bought over the remnants of Skully in 2017 and is promising original backers that it will honour their original pledges that they made over a year prior. The helmet also made an appearance at CES 2018, a sure sign of its return.
City Harvest Church
Image source: TODAYonline
In 2002, City Harvest launched the “Crossover Project” – a scheme that aimed to evangelise through secular pop music, fronted by Kong Hee’s wife Ho Yeow Sun. Buoyed by the modest success of her early Mandarin singles in Asia, the church decided to bring her into the US market. Ms. Ho’s image was revamped as a rapper-singer nicknamed Geisha in a collaboration with US rapper Wyclef Jean. The collaboration spawned two singles – the notorious “China Wine” and “Kill Bill” – which made as much impact on the charts as a drop of water in the sea.
However in 2010, acting on a number of anonymous complaints, the Commissioner of Charities and Commercial Affairs Department opened an investigation into the megachurch’s accounts. The investigation, after 2 years, unveiled misconduct and mismanagement by the church administration, led by Pastor Kong Hee, with $50million SGD of contributions by devoted churchgoers involved. $24 million went into bankrolling the US pop career of founder-pastor Kong Hee’s wife, Ms Ho Yeow Sun. The remaining $26 million was used to cover up the tracks of the initial sum.
This case is described as Singapore’s largest case of misuse in charitable funds.
On appeal, an alternative interpretation of the Penal Code in Singapore brought their original convictions down to a lesser charge. This led to a reduction in their jail sentences -between 7 months to 3 and a half years – down from the original 21 months to 8 years. One of the involved parties later had 13 months added to it after attempting to flee the country in a motorised sampan (fishing boat).
Image source: Straits Times | Photo by Tan Tam Mei
National Kidney Foundation
The National Kidney Foundation is something of a household name in Singapore because of their signature televised fundraisers – and a charity fraud scandal in 2005 involving then-CEO T.T Durai, which rocked the non-profit sector.
In April 2004, local Singaporean newspaper The Straits Times ran an article with a series of allegations, including that a gold-plated tap, a glass-panelled shower and an expensive toilet bowl had been installed in CEO T.T Durai’s office nearly ten years prior. NKF saw red with the article and soon after, sued Singapore Press Holdings (the publisher of The Straits Times) and the journalist who had written the article for defamation. The trial began in 2005.
NKF’s defence quickly fell apart once details about Durai’s lavish lifestyle and other misconducts began to be unearthed during the trial. On the second day of trials, Durai dropped the suit, conceding that the article was genuine. The damage had been done – Durai and the rest of NKF’s board stepped down, and a series of investigations were opened.
The biggest damage however might have been the very name of NKF itself. Once able to raise an average of $64 million a year, that amount had fallen to around $20 million annually as of a 2013 news report. The charity raised $23.3 million in their last financial year ending 30th June 2018.
More than a decade after the debacle, the charity continues to finds itself treading on eggshells. It only resumed fundraising activities in 2011, relying only on their reserves between 2006 to 2011. Its high-octane televised fundraisers are a thing of the past, and news reporting involving NKF or other cases of fraud frequently reference the scandal.
The Trump Foundation
Image source: ABC News
As controversial as American president Donald Trump, is his now-defunct charity, the Trump Foundation. A New York judge, Justice Saliann Scarpulla, approved a deal to shut down Donald Trump’s personal charity after a lawsuit exposed a “shocking pattern of illegality”. The remaining $1.7m of assets held will be split between other charities.
Trump Foundation attracted the attorney general’s office ire after investigations found that the foundation had entered into a number of “prohibited self-dealing transactions that directly benefited Mr. Trump or entities that he controlled.”
The Washington Post first reported on a number of questionable expenditures. Among the transactions was a $10,000 purchase for a portrait of Mr. Trump that was displayed at one of his golf clubs. Other dubious transactions include a handwritten note dictating the transfer of $100,000 to another charity to settle a legal dispute with his Mar-a-Lago resort, and a prohibited political donation.
However, what attracted the most flak was likely the foundation’s ties to Trump’s own presidential campaign. State investigators are alleging that Trump “ceded control” of his charity to his political campaign. A fundraiser in Iowa brought in $2 million, which was routed to the foundation. His campaign manager would then determine how the funds were used.
Do check out our guide on ways to stay safe on crowdfunding platforms as well!
How do you think these cases could have been mitigated? Is it possible to truly eradicate these cases completely? Share your thoughts with us!