Washington state files first ever lawsuit over failed Kickstarter campaign

Ever wonder what happens to companies that raise money on Kickstarter but don’t deliver on what they promised? If you mess with people in Washington state, the attorney general will come after you.

In what’s the first consumer protection lawsuit in the nation involving crowdfunding, Washington State Attorney General Bob Ferguson today sued Ashville, Tenn.-based Altius Management and its founder Edward J. Polchlepek, otherwise known as Ed Nash.

Nash raised $25,146 from 810 backers in October 2012 – including at least 31 from Washington – for a playing card game called Asylum pushed on Kickstarter.

Project backers were promised the playing cards and other rewards with an estimated delivery date of December 2012. Ferguson says to date, the project has not been completed and none of the backers have received any of the promised items or any refunds. Nash and the company haven’t communicated with donors since July 2013.

Kickstarter’s terms of use make clear that companies are legally obligated to fulfill the promised rewards or provide consumer refunds.

“Consumers need to be aware that crowdfunding is not without risk,” said Ferguson. “This lawsuit sends a clear message to people seeking the public’s money: Washington state will not tolerate crowdfunding theft. The Attorney General’s Office will hold those accountable who don’t play by the rules.”

The case is being handled by Assistant Attorney General Jake Bernstein, who tells KIRO Radio he’s had a few failed Kickstarter campaigns of his own and wondered what happens when a company doesn’t deliver.

“I started talking to people on Kickstarter and asked if there were any straightforward failures to deliver,” he says.

Bernstein says he got a tip from a donor who didn’t receive what was promised, and decided to pursue Nash when he learned of his failed campaign.

“The money went somewhere. So he got a lump sum from all of these backers and there’s no excuse why they didn’t get their cards,” Nash says.

While the case is the first involving a crowdfunding campaign, Bernstein says the legal principles are no different than any other failure to deliver action. He says the goal is ultimately to get Nash to fulfill his obligation and produce and deliver the cards, or provide a refund to all the donors.

Kickstarter issued the following statement in response to the suit:

Tens of thousands of incredible projects have been brought to life through Kickstarter. We want every backer to have an amazing experience, and we’re frustrated when they don’t. We hope this process brings resolution and clarity to the backers of this project.