what's to prevent someone from ripping off your crowdfunding campaign? not much

5/4/2015 What's to Prevent Someone From Ripping Off Your Crowdfunding Campaign? Not Much.

http://www.entrepreneur.com/article/245656 1/9

CROWDFUNDING

What's to Prevent

Someone From Ripping

Off Your Crowdfunding

Campaign? Not Much.

Image credit: Dawn Sole

Catherine Clifford

Entrepreneur StaffFrequently Covers Crowdfunding, The Sharing Economy And SocialEntrepreneurship.

MAY 04, 2015

Dawn Sole was hunting through her purse in a grocery

store parking lot one day in August 2010 when she

came up with the idea for the Pluck N’ File. She had

chipped a nail while carrying too many groceries and

needed to smooth out the jagged edge. First, she had



to hunt around her purse for her nail file. Then, she dug

around for her nail buffer. Finally, taking advantage of

good lighting, she decided to clean up her eyebrows

and went back into her purse for the third time looking

for tweezers. It was then that she thought, why couldn’t

these grooming tools be rolled into one, female Swiss

Army knife style? She drove directly to CVS, bought a

bunch of parts, and set out to invent what she had just

dreamed up.

After months of tinkering and countless manufacturing

beta tests with companies based in China, Sole, who

lives in Miami Beach, Fla., came up with a prototype she

was pleased with. She decided to raise money via

crowdfunding for her first real production run, turning to

the most popular brand-name platform, Kickstarter.

That was in September of 2013 and at that point,

“personal care products,” including the Pluck N’ File,

were not allowed to be featured on the crowdfunding

platform. Since then, Kickstarter has loosened its rules,

expanding its range of campaign categories.




Related: Food-Tech Startup Dinner Lab Is

Crowdfunding a Cool $2 Million -- From Its Customers

Having been rebuffed by Kickstarter, Sole launched her

campaign on rival crowdfunding platform Indiegogo in

November 2014, setting a goal of $25,000. She poured

everything into the campaign, having left her six-figure

corporate job in October 2012 to focus full time on Pluck

N’ File.

“I took literally every penny that I had from my 401(k). I

have been bootstrapping everything,” she says. “That’s

why I did the crowdfunding campaign. I have basically

tapped out my resources.”

Then, a harbinger of impending confusion: Sole began

to get phone calls and emails from people looking to

donate to her campaign, but weren’t sure which



campaign they should donate to.

On Dec. 5, Sole Googled her company name and was

shocked to find her same Pluck N’ File Indiegogo

campaign running on Kickstarter. Someone had ripped

off the entire campaign, nearly verbatim, and was

raising money doing it.

Related: Déjà Vu 2012: A Zombie-Frankenstein JOBS

Act 2.0 Is in the Works

Immediately, Sole called her attorney and together they

alerted Kickstarter of the fraudulent campaign.

Kickstarter suspended the campaign. Currently, the

webpage where it existed says that the project “is the

subject of an intellectual property dispute and is

currently unavailable.”




For campaigns that are suspended, Kickstarter does not

allow money to change hands. Ergo, whoever copied

and pasted Sole’s crowdfunding campaign did not end

up making any money. What Sole argues, however, is

that her reputation as an inventor and entrepreneur has

been irrevocably damaged. Potential investors who

might have searched for her name online to contribute

to her crowdfunding campaign could have found the

wrong campaign, donated, and received no further

correspondence or product updates.

The campaign on Kickstarter was created by someone

by the name of Bilquees Ottun, whose contact

information is not publicly available. Kickstarter would

not reveal Ottun’s contact information to Entrepreneur

for privacy reasons, but confirmed that it reached out

on our behalf. We have yet to receive a response from

Ottun.

Related: For This Cat Cafe, Crowdfunding With

Kickstarter 'Was Never About the Money'

The fraudulent campaign raised more than 17,000

pounds, or approximately $26,810, which was more

than the genuine campaign managed to raise. Sole says

the diversion of dollars to the copycat project resulted

in her not hitting her goal on Indiegogo. She still

received the money raised -- a little over $18,000 --

however, on Indiegogo, campaign owners who don’t

meet their flexible funding goal pay a 9 percent



commission on their funds versus the 4 percent paid by

goal achievers. In Sole’s mind, she paid more to raise

less money.

Still, it’s not just about the money. Sole is on a crusade

to find out more and do what she can to prevent this

from happening to other people, claiming her brand has

been tarnished. “It is about doing the right thing. I refuse

to let anybody do things that are illegal or immoral. I am

very passionate about it.”

Unfortunately, preventing bad things from happening in

the Wild West of crowdfunding is, because of current

regulatory frameworks, something akin to Don Quixote

fighting his windmills.

There’s no legal precedent for this sort of legal

protection of intellectual property, says Sole’s

intellectual patent attorney, Loren Donald Pearson. “We

haven’t seen the scam perpetrated by anyone else.”

Related: Crowdfunding Nearly Tripled Last Year,

Becoming a $16 Billion Industry

While it’s a pretty easy scam to run, it’s a pretty near-

impossible scam to litigate with any financial success.

When you are talking about the micro-investments that

power crowdfunding campaigns, Pearson says most

lawyers will advise you not to “throw good money after

bad.” Why? Not only is a legal consultation likely to cost



more than most crowdfunding investments, but the

inventors who are attracted to crowdfunding in the first

place often don’t have extra money to spend in the first

place. “They are in a phase where they are trying to

raise money, not spend money,” says Pearson.

Sole has a map on her wall with cargo ships carrying her Pluck N' File device all over the

world for inspiration.


Sole is determined to seek retribution, though, and

Pearson says their best, most realistic goal is to obtain a

list of all of the people who donated to the fraudulent

Kickstarter campaign. Pearson says he suspects some

of those investors may have been in on the scam; if they

contributed money to push the funding over the

$25,000 threshold, they would not only get their cash

infusion back, but the money of the unknowing

investors, too, who would have been encouraged to

contribute to a campaign already well on its way.

Pearson also wants to help repair any damage to Sole’s



reputation by getting in touch with unknowing donors.

Kickstarter says that its fraud detection system worked,

given that the copycat campaign was flagged and

suspended before any money exchanged hands. “We

invest heavily in keeping Kickstarter trusted and safe.

Our integrity team uses complex algorithms and

automated tools to identify and investigate any potential

abuse of the system. And we don't hesitate to suspend

projects that break our rules, as we did in this case,”

says spokesperson Justin Kazmark.

But Sole says that Kickstarter should be doing more due

diligence than it is currently doing. She wants FINRA,

the Financial Industry Regulatory Authority, to issue

more guidelines and keep a tighter leash on

crowdfunding platforms, having sent them more than

three dozen packets of research and materials on her

case.

Related: Reddit Co-Founder: Crowdfunding Is

Powering a Second, Much Bigger Renaissance

Meanwhile, industry leaders in the crowdfunding space

say that kind of tightening of the screws on the

regulatory throttles for crowdfunding platforms would

handicap the system to the point of making it

ineffective.

Alon Hillel-Tuch, co-founder of New York City-based



crowdfunding platform RocketHub, has been working

with lawmakers and regulators for years to write rules

for equity crowdfunding, the type of crowdfunding that

involves entrepreneurs selling stakes in their

companies. In his mind, demanding checks on every

campaign would make crowdfunding cost-prohibitive.

“Crowdfunding platforms receive a lot of project

submissions, and are only able to do a certain level of

background checks,” he says. “However, a full due-

diligence on every single project and the business

merits of their campaign is not something any platform

should be expected to undertake.”

Related: Reddit Co-Founder: Crowdfunding Is

Powering a Second, Much Bigger Renaissance

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