Good day everyone:

This post may be lengthy, but I wanted to create it to open up a dialogue (if there is interest) about the possibility of taking legal action against fraudulent crowdfunding campaigns, as well as the pros, cons, problems, and possible solutions to those problems.

I am a lawyer by trade. I primarily deal with 1) companies that won't stop calling you when you never gave permission or after you asked them to stop; 2) abusive debt collection practices; and 3) consumer protection. I have been practicing for four years. I graduated Harvard Law in 2012, worked for a big corporate defense firm very briefly, then switched over to a Plaintiff's consumer protection, and now I am a solo practitioner. I am based in New Jersey.

I have thought quite a bit about ways to protect or recover for consumers who were, or are in the process of being, scammed on one of the crowdfunding sites. There are some very strong examples: it is my opinion that Coolest Cooler asking for $97 more from backers to ship what they were already promised, and refusing to offer a refund, and actively selling through other channels, would be actionable (i.e. you could sue over it with a decent shot of winning). And I am confident that certain more obvious likely scams (Triton, for example) could be stopped before the money ever went to the company, though this would be a more novel approach.

I have also considered the possibility of holding the companies themselves accountable. I firmly believe that IndieGoGo's "flexible funding" policy could be found to violate some state consumer protection laws, either entirely or on those projects that are scams and IndieGoGo still keeps its fee.

The problem, of course, is, as it tends to be, money. This is true in three ways:

1. The companies, like the Coolest Cooler, likely don't have money, which is why they're running into these issues. And once it gets transferred to some companies like Triton, good luck getting it.

2. Because these companies don't have money, a class action does not make sense for the lawyers. Lawyers almost always take class actions on contingency -- this means that they don't get paid until the end, and usually then only if they win. But this money comes from the Defendant, not the class members. If the Defendant has no money, a class action would be a huge time and money sink for the attorney.

3. The value of an individual claim is typically very small. As Judge Richard Posner (he's famous) wrote: “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits as only a lunatic or fanatic sues for $30.” Unstated is that the reason for this is the cost of a suit. It will likely cost thousands to get that $30. Even in the Coolest Cooler situation, it's a few hundred.

Now, some laws allow for attorneys' fees to be recovered on an individual claim. For example, in New Jersey, if I show you were damaged ("ascertainable loss") by an illegal practice, I am able to recover my attorneys' fees, even if your damages were only $5. The problem, again, is that if the money has to come from a broke defendant, the judgment or settlement is worth nothing more than the paper it is written on.

That said, I wanted to hear some thoughts on creative solutions to this problem. In my opinion, companies should be held accountable, legally, even if they cannot pay whatever penalty is assessed.

One idea I had is to use the social funding mechanism to create an Avengers-style team of lawyers, strategically located in consumer friendly states, to take cases, paid from crowd-funded funds. For example, last check, it seems 30,000 people are waiting for their Coolest Cooler. If each of them kicked in $5, that would likely be more than enough to see a lawsuit through to completion against the company. This would not be a windfall to the attorneys, either. The goal would be to treat it like a retainer -- the $150,000 sits in a trust account, and attorneys only receive payment for work actually done and costs actually accrued. If there is money left over, that will roll over to help fund the next lawsuit.

Maybe this idea is a terrible one, full of glaring omissions, worthy of r/shittykickstarters. After all, there's a very real chance that each person who pays $5 never receives a Cooler or a refund. Is $5 worth holding a company accountable for accountability's sake? I don't know the answer to that. And there's a very real chance that a lawsuit eliminates any remote possibility of the company eventually delivering. Maybe it's impossible -- I need to do research into how it comports with the legal ethics requirements.

But I nevertheless wanted to give some perspective on the legal side of things, throw out an idea, and also hear any other ideas for how to hold the companies or the platforms accountable for valid projects gone bad or projects that were scams from the outset.