Crowdfunding fraud raises concerns over online campaigns

In the wake of two area cases that involved the misleading of online donors, some are advising caution when giving to charitable causes online in the exploding and largely unregulated world of crowdfunding.

Crowdfunding allows individuals to raise money online, but cases involving scams and questionable campaigns can make it tricky for well-meaning individuals to navigate the online world of crowdfunding campaigns on sites such as GoFundMe, Kickstarter, Indiegogo and YouCaring.

“In many of these charitable fraud cases, folks want to cut out the middleman,” said Champaign County prosecutor Kevin Talebi. “People want to donate directly to the person who is going to receive the benefit to make sure the person who is supposed to receive the benefit gets 100 percent of their money.”

Tina Harper of Springfield Twp. was sentenced last week to two months in jail after setting up a campaign on YouCaring.com to raise money for the King family, whose son was killed June 10. Harper allegedly gave the Kings about $1,600 of more than $2,800 raised.

That came after Urbana resident Heather Gaus was sentenced to one year in prison on July 15 for falsely claiming she had brain cancer while raising money on YouCaring.com. She pleaded guilty to a felony theft charge and owes more than $3,200 in restitution to more than 30 victims.

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But few formal protests are filed about crowdfunding sites. The Ohio Attorney’s General Office found just two records about GoFundMe, Kickstarter or YouCaring in its consumer complaint database, and both involved the same account touting playing cards that the complainants said already existed.

Talebi, the prosecuting attorney in the Gaus case, said charitable fraud cases are “something I think we’re seeing more and more of.” One of the biggest reasons charitable fraud may be on the rise is simply because people are generous, he said.

“I’m not surprised, because my personal experience is we have a very generous community, and when people are willing, they’ll open up their hearts and wallets for someone in need,” Talebi said.

Success stories

There are crowdfunding success stories. The founders of Noxgear, a Dayton company that makes neon, glow-in-the-dark vests for nighttime bikers and runners, started their company after raising more than $29,000 through Kickstarter in 2013. That was $10,000 more than their goal.

“We grew and opened up manufacturing in China and launched another Kickstarter campaign, and we barely got by on that, but we’ve grown to a larger company,” said Simon Curran, co-founder of Noxgear.

Others use crowdfunding sites to raise money for medical bills, pet care, burial expenses and family support. On GoFundMe, Dayton resident Shelley Lopez recently set up a fundraiser for Dennis Fry, recently diagnosed with brain cancer.

“Help us raise $25,000 to hold up Dennis and Erin during this time. Every donation will make a world of difference for this family,” Lopez wrote on the Frys’ GoFundMe page.

She did not return calls seeking comment. Lopez has raised more than $23,000 of the $25,000 goal for the Frys since the May 22 campaign debuted.

Variety of causes

A sampling of 500 GoFundMe campaigns in southwest Ohio through July gained an average of $2,550 in donations, ranging from $500 (of an $1,800 goal) for a woman seeking travel expenses to participate in an experimental medical study for juvenile diabetes to more than $200,000 for the family of Cincinnati police officer Sonny Kim, who was shot and killed while on duty in June.

The campaign for Kim was started by Derek Bauman, a Mason police officer and president of the Mason Police Association. He said people messaged him through the GoFundMe account to ask him if it was legitimate and if their information was safe. He advised people who felt uncomfortable using a credit card to donate through a separate fund set up through a bank.

“It pays to be aware of who the source is and to read what description they have,” Bauman said. “At a certain point, though, you have to trust. It’s good to keep an eye out. Don’t blindly send your money and do a little research into what the cause is.”

Those causes can tug at emotions. More than half of the GoFundMe campaigns sought funds for medical or “memorial” expenses, generally seeking a few thousand dollars apiece.

The site Kickstarter is tougher on campaigns, releasing funds only if a defined goal is reached by a closing date. More than half of a sampling of 4,000 Ohio Kickstarter campaigns failed, reaching just 12 percent of their goals, on average.

But some pay off big. A Fremont campaign raised almost $680,000 to develop an “empire building game” called “Mare Nostrum – Empires.” Thirty of the 4,000 sampled Kickstarter campaigns gained more than $100,000 for products or services ranging from games, 3D printing, clothing, audio recording, grills and watches.

The power of crowdfunding is clear. The two sample sets studied by this newspaper — 500 GoFundMe accounts and 4,000 Kickstarter accounts — were pledged more than $22 million.

Some shut down

While some crowdfunding sites seemingly have no rules — evidenced by Zack “Danger” Brown’s 2014 Kickstarter campaign to make potato salad in Columbus — GoFundMe will take down campaigns it believes do not satisfy its “terms and conditions.”

In April, GoFundMe shut down a campaign raising money for the Klein family, owners of Sweet Cakes by Melissa in Oregon. The family is facing a $135,000 fine for refusing to serve a lesbian wedding.

GoFundMe defended its action by writing a blog post declaring, in part, “GoFundMe will not allow campaigns that benefit individuals or groups facing formal charges or claims of serious violations of the law.”

GoFundMe’s initiative to clarify what is and isn’t allowed might be a cue for other crowdfunding sites — like YouCaring.com — to work toward preventing direct involvement in crime.

Talebi and GoFundMe advise those thinking about donating to a funding campaign to “always be cautious” and make sure they only donate to people they “personally know and trust.”

“I think the good news is these cases are still rare and most of the folks soliciting money actually receive the benefit,” Talebi said. “It’s still a very rare event that I receive a charitable fraud case. The Gaus case was the only one I had received.”

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