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Kickstarter pledge fatigue, scams, and stalled projects

Kickstarter and other crowdfunding platforms have gone mainstream, attracting scammers, misuse, and many have complained of Kickstarter fatigue.

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Kickstarter and a waning crowdfunding movement

Kickstarter is the largest of the crowndfunding websites wherein inventors, artists, and the like can post videos and description of why they need financial backing, listing what they will give to people for pledging cash, and if enough people chip in and they meet the financial goal they set, they get all of the cash, but if they don’t get enough pledges, no money changes hands.

It’s a wildly popular funding option with Kickstarter projects alone raising $275 million last year, and is popular enough to have the attention of the U.S. Securities and Exchange Commission (SEC) which is reviewing what regulations they will impose on crowdfunding.

Crowdfunding seeing their share of scams

Facebook users know that they haven’t won free airline tickets just because they were tagged in a picture, email recipients know the Prince of Nigeria doesn’t really want to give them a bajillion dollars, and Vine users (as well as anyone with an internet connection) knows that pornographic material has made its way into the video service. The truth is that crowdfunding isn’t unique in being vulnerable, as the web makes it easy to scam people – it’s not like a dark alley with a creepy guy offering you Foakleys, Pravdas, or PRolexes from the back of a truck or inside of his coat.

Most projects posted on Kickstarter, Indiegogo and others are legitimate and often innovative, but as with all websites, the dark alley creeps have found their way in, and are quite convincing.

Two cases of bad crowdfunding behavior

According to Consumerist.com, one Kickstarter project is currently suspended, pending an internal investigation, as a man was selling $15 watches for $100, disguising them as “high-end” time pieces, raising $9,000 before the plug was pulled.

Recently, one Kickstarter investor sued over a Kickstarter project, as an entrepreneur who formerly designed projects took the leap into manufacturing and after what backers called endless stall tactics, Neil Singh sued for breach of contract as the simple iPad he “invested” in was never created or delivered, ultimately putting the entrepreneur and his company out of business.

These two stories are not the only cases involving questionable products being sold, or struggles with the manufacturing process leading to delays in delivery (with delivery never happening in some instances). The general attitude of people who have been backing projects from the beginning is that it is an investment which comes with risk, but others see it as a creative way to buy products, so the pledge mentality is certainly changing as crowdfunding goes mainstream.

Kickstarter in particular has been very responsive to questionable projects and products and suspends accounts for investigation rather than ignoring it. PCMech has published a useful guide on how to tell if a Kickstarter campaign is bogus.

Introducing Kickstarter fatigue

If you run in any technology or art circles, you’ve probably been solicited for pledges to various Kickstarter or Indiegogo projects ranging from “Artist X wants to make an album” or “Producer Y wants to shoot an independent film,” or even “Inventor Z wants to make a new thingamajig.” We have most certainly been inundated and rarely make any pledges in an effort to maintain objectivity as we cover Kickstarter projects, but what about the average person, or particularly the well connected person?

Sallie Wood, Creative Principal at redshoestudio tells AGBeat, “One of my talented musician friends used kickstarter to record a wonderful album of lullabies. Another was the narrator for a really cool animated film. I have lots of talented friends who all seem to have a project they want to fund. I can’t possibly give to all of them. Telling friends that you might give if only their project was more compelling is not a good idea if you want to remain friends. Who wants to judge their friends project?”

Wood added, “I have given to projects I believe in and I will probably give again but I am suffering from kickstarter fatigue. Just today I had a request via inde gogo requesting funds to send a friend’s kid to Europe for a school trip. This has gone too far.”

Crowdfunding isn’t a generic collection plate, people.

Not only is fatigue setting in, the actual projects requesting funding have gotten out of hand – one source tells us that they’ve been appalled at the projects found on crowdfunding sites as they search for gadgets or art projects, rather are met with people asking for money to build their own garden, open a second food truck, cut their thirteenth album, and even pay for their child’s summer camp or swimming lessons.

While crowdfunding is an effective alternative to traditional banking, it is unfortunately becoming some random peoples’ way to pass around a collection plate, is causing investor fatigue as they get endless requests for money, and in some cases, it’s being used by creepers’ passing of counterfeit products, or inexperienced entrepreneurs unable to ever deliver a project they intended to.

Lani is the Chief Operating Officer at The American Genius - she has co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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5 Comments

5 Comments

  1. jesus fchrst

    February 2, 2013 at 1:21 pm

    I don’t care if KS is “flooded” with millions of useless projects (as you say), just go to Kicktraq and sort out the ones you want and don’t want. Somebody wants to send their kid to summer camp? Great, I’m not giving them any money, but hey look at that idiot woman who got “bullied” or whatever… people gave her a big stack of cash. Just because you don’t like a project doesn’t mean a thousand other people won’t.

    • truthandall

      March 23, 2013 at 4:01 pm

      Yeah and it just goes to show you how stupid americans are. No wonder bankers feel no shame about killing the economy, why would they if the kind of people they destroyed are the sort of idiots to give a feminist bigot money for being called out for her crap.

  2. Carlos Hoyos

    March 10, 2013 at 9:26 pm

    That woman who got “bullied” was a scammer that purposefully went to the worst places in the net and created controversy to fish for gullible idiots that would put money to see her “youtube videos”.

    • Humz tariq

      March 14, 2013 at 6:00 am

      what? are you kidding me? Neither the video nor the donation page was set up by her.

  3. Pingback: Clearly Canadian, Clearly a Rip-Off? - The American Genius

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Business Finance

Small business owners furious over more PPP fraud this week

(FINANCE) With rampant fraud and huge companies receiving aid intended for small business… Who is the Payment Protection Program really protecting?

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Small business owner on laptop, stressed over Payment Protection Program fraud and struggles.

Small business owners are furious this week after yet another fraudulent PPP (Payment Protection Program) loan application was discovered. The program, which was originally conceived to protect small businesses with providing federal loans, was a part of CARES (Coronavirus Aid, Relief and Economic Security) Act, which was passed by Congress in March.

The application came from Houston resident Lola Shalewa Barbara Kasali (22) for almost $2 million. Kasali claimed she owned two small businesses – Lola’s Level and Charm Hair Extensions – and applied for two separate loans to cover her alleged employees and payroll expenses.

After receiving $1.9 million in loans, Kasali transferred the money to various other bank accounts. She was charged with fraud earlier this week.

Unfortunately, cases of PPP fraud are rampant, meaning that the funds allotted for struggling small businesses in the time of COVID-19 are being misused. While it’s easy to call out individuals who are scamming the system, we are seeing that everyone – even the rich – are trying to get a piece of this pie.

In April, fast casual giant Shake Shack returned their $10 million PPP back to the government in what many saw as a media stunt. Why did a multi-billion-dollar company apply to a program meant for small businesses anyway?

The same can be said about the Los Angeles Lakers. Yes, the team does employ under 300 individuals. But do the wealthy members of a professional basketball team really need additional funds while the rest of the working class suffers?

Additionally, over 10,000 PPP loans were mistakenly dispersed to businesses that had already received a loan or those who were excluded from the program for various reasons.

Initially, the SBA put $349 billion into the program. Due to extremely high need – and many cases of mismanagement or fraud, like those mentioned earlier – the funds went in a flash. Though the SBA did replenish the Paycheck Protection Program with an additional $310 billion in April, the program expired on August 8th. And currently there is no solid plan to extend it, leaving small businesses to fend for themselves.

Another factor to consider regarding the faults of Payment Protection Program is the inherent discrimination. Experts say that, because of how the program is structured, more than 90% of businesses owned by women and people of color are or will be excluded from receiving funds from PPP. Our best bet for the time being is to help each other on a community level as much as we can.

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Business Finance

Small businesses: CapitalOne, GoFundMe want to give you money

(BUSINESS FINANCE) Capital One, GoFundMe, and others are joining forces for good, providing ways for consumers to help lift up small businesses in a time of great need.

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Black man and women in their small businesses attire

Small businesses account for around 44% of U.S. economic activity, according to USA Today. Finding a way to buoy them up now is crucial to their survival. We cannot afford to lose the 58% of small businesses who say they may go under forever.

Short of in-person shopping, how can we as consumers, help? Consumers can now help through smallunites.org, an organization pulled together to share several ways to support small businesses.

The Small Unites platform also provides ways for small business owners to connect with helpful resources, including business and marketing advice. In a surprising twist, the entities tossing this lifesaver to small businesses at risk of sinking are larger companies, including Capital One, HundredX, GoFundMe, the National Urban League, and Ogilvy, among others.

Six months after the COVID-19 shelter-in-place orders were issued in the U.S., many small businesses are still struggling to stay afloat. Some are still operating through curbside or online orders only. Others are operating with a reduced capacity, limiting the number of people in their stores at any given time.

The PPP funds have been spent, as have stimulus checks, and many people are watching their budgets. Despite wishful thinking and finally some success with mask wearing, we are nowhere near a full reopening in this country. Even if it were allowed, the majority of people are still social distancing as much as possible and are finding other ways to shop – mainly online.

GoFundMe has a platform to donate money directly to a specific small business for those who can afford to. Consumers may also make a tax deductible donation to the overall fund that distributes the money through small business grants, such as the Small Business Relief Fund via GoFundMe. This money will be sent out in $500 grants to small businesses who apply and qualify.

Some people want to help but are also strapped for cash. Small Unites has come up with a way to contribute without spending or donating money. With HundredX, consumers write a review of a small business on the HundredX platform. HundredX will then donate $2.00 per review to programs in conjunction with the National Urban League to programs supporting minority-owned businesses. Each contributor is able to write up to 50 reviews for a grand total of $100.00 per person. HundredX will continue to donate per review, up to their $1M program cap.

Small business owners, things may look bleak from where you’re sitting. I urge you to seek out some of this support, provided at no cost to you. In addition to perhaps the most urgent need, money, Small Unites also provides tips and guidelines from Ogilvy to businesses that sign up for the program.

These tips include marketing, social media, and communication advice. The Small Unites website also has a “Shop” section to locate small businesses in the immediate area where consumers can shop right now.

The U.S. can’t afford to lose its small businesses. These are often unique places infused with the owner’s passion. Small businesses often support local economies, too, providing a marketplace for local makers, farmers, and other creative people. They are vital businesses, often representing the beating hearts of our communities.

For the skeptical among us, of course Capital One, GoFundMe, and the rest are going to get PR brownie points for this. That doesn’t make the assistance any less significant to saving our small businesses. Motive matters, but let’s not starve on principal. It makes no sense. Someone at these large institutions must also realize that it’s the many small businesses out there that contribute 44% of our economic activity.

Helping the mom-and-pop shops isn’t merely a publicity stunt. It strengthens our economy as a whole. This lifeline also has the ability to strengthen morale and restore hope when they are in short—or at least inconsistent—supply. Knowing that a favorite business is managing to stay afloat amid turbulent waters buoys our spirits.

Small businesses, go sign up for all of the Small Unites assistance! Everybody else, let’s all pull together, with the help of these big corporations, to try and save our small businesses. We need them for our economy. We need them for our mental health. We need them, period.

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Business Finance

Bitcoins worth $300K recovered from an old zip file

(BUSINESS FINANCE) Losing the password to your Bitcoin wallet often means potentially losing your cryptocurrency. But this didn’t stop a Russian investor from getting his money back.

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Stack of bitcoins

At some point in our life, we’ve all lost or misplaced something. I’ve misplaced my phone and keys more times than I can count. They always have a way of finding themselves between the couch cushions. But have you ever lost the private keys to access your $300,000 worth of bitcoins? Neither have I. However, this is exactly what happened to a very unlucky man.

Last month, Defcon’s 28th annual event took place. The event is the most influential security hacking conference held in Las Vegas. Michael Stay, a reverse engineer and current CTO for Pyrofex Corp, shared the story with attendees. He started his presentation by saying, “And today I’m gonna to tell you about how we recovered several hundred thousand dollars worth of Bitcoin from an encrypted zip file.”

About twenty years ago, Stay published a cryptanalysis paper detailing how to break into encrypted zip files. This paper led an anonymous Russian investor to find Stay and send him a surprising message on LinkedIn. “So in October of last year, a guy contacts me out of the blue and says, “I read your paper on known plaintext attacks, and I’ve got this password that I’ve forgotten. Is there anything you can do to help?”” Stay said.

In 2016, the investor purchased $10,000 worth of bitcoins and placed the private keys in an encrypted zip file. After the Bitcoin boom, the purchase proved to be a great investment. There was just one slight problem: He forgot the password and had no way of accessing the Bitcoins.

After stumbling on Stay’s old cryptanalysis paper, he hoped Stay would help him break into the zip file and recover the lost keys. When Stay looked into the case, he soon realized this would be a difficult task. The attack he had written years ago needed five files to break into the zip file. This man only had two files in the archive.

With only two files, this would take Stay a lot of time and money to find a solution to the problem. After doing some calculations, he told the guy it would cost him around $100,000 to attempt to recover the keys. He simply couldn’t use regular “off-the-shelf software” to get this done.

The man agreed without hesitation. Stay’s mind was blown away with his response. “I knew he probably had several hundred thousand dollars of Bitcoin in this thing,” he said. The pressure was on!

To break-in, Stay enlisted his business partner, Nash Foster. Foster helped adapt his CPU based attacks to run on GPUs, and they rented a GPU farm. “Our initial expectation was we would do engineering for a couple of months, and then the attack would have to run for several months to succeed,” Foster told WIRED.

Four months after the initial LinkedIn message, they began the attack. “We had tried it in all our test archives that we’d created. It worked fine,” Stay said. They were hopeful. “Ten days passed, and it didn’t find a key. And we were distraught, pulling our hair out. What have we done wrong?” Stay asked himself.

After combing through the data, the investor, who is a programmer himself, discovered a bug in the GPU. Once Stay and Foster fixed the bug, they were able to restart their attack. Within a day and a half, they found the three keys they needed to decrypt the archive.

In the end, the improvements made to Stay’s old attack made a significant difference. Instead of the $100,000 and year of processing time that Stay estimated it would take, they were able to do it for less than $10,000 in two weeks of processing time.

“Our client was very pleased and gave us a big bonus! And that’s how we recovered his Bitcoin folder,” Stay said.

According to a 2017 research by analysis company, Chainanalysis, nearly 400 million Bitcoins are already lost. Although Bitcoins have no physical form, they can still be lost. Forgotten private keys and passwords, and discarded and lost devices account for this high number.

The Russian investor wasn’t so unlucky after all!

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