Recently, The New York Times reported on a case wherein a New Jersey man and his girlfriend got 5 years in prison for GoFundMe fraud. Mark D’Amico and Katelyn McClure teamed up with Johnny Bobbit Jr. to make up a story about a homeless man in need of help. They raised over $400,000 after the story went viral.
The couple gave $75,000 to Bobbit, the homeless man, and spent the rest on gambling, vacations, a BMW, a helicopter ride over the Grand Canyon and Louis Vuitton handbags. Bobbit sued, bringing the scheme to light.
Bobbit himself was charged because the story was predicated on the idea that Bobbit gave up his last $20 to help McClure while she was stranded on the highway. He helped perpetuate the story and so was charged with conspiracy to commit theft by deception. Text messages revealed the story was just that—a story.
Crowdfunding fraud occurs when a party fails to deliver on promised goods or gifts, or when donor money is misused. While it is permissible for a product to underperform or fail, out and out fraud is a crime.
The two, however, could look pretty similar if you run a campaign and things don’t go quite as expected.
The defenses for crowdfunding fraud are similar to the defenses for any other fraud case. Lack of Intent is a likely one, especially if you had a good reason for the failure or shipped promised products that the recipients simply did not like. It is also possible to use the constructive fraud defense, which claims the fraud was the result of reckless business practices with no intent.
Mistake of fact is another potential defense. For example, if you started a GoFundMe to help a person and you truly believed they were homeless when they were not, in fact, homeless, then you yourself did not commit the fraud. You simply responded out of the goodness of your heart to someone who fooled you.
Finally, the puffery defense could be a good one in a crowdfunding fraud case. Puffery is simple exaggeration; marketers, salespeople, and individuals running Kickstarters use it all the time to make the sale…or get the backing. While lying is prohibited, exciting, puffed up language is not. That’s why the home shopping channel can tell you that a vegetable spiralizer will “change your life,” when, in fact, it’s just going to help you make zoodles.
If you’ve been accused of crowdfunding fraud, turn to the experienced white collar criminal defense attorneys at Koch Law. We can help.