The U.S. Federal Trade Commission (FTC) recently filed a lawsuit against a crowdfunder who diverted customers’ funds to purchase bitcoin. According to The Next Web, the entrepreneur raised funds over $800,000 to buy iBackPacks but instead diverted the funds to personal use such as buying crypto and paying off credit cards debts.
iBackPack for Bitcoin
Douglas Monahan, who runs a company called iBackPack of Texas, LLC, is facing a lawsuit from the FTC. The suit filed on March 6, 2019, accused Monahan of unlawfully using funds meant for the purchase of tech-imbued backpacks to buy bitcoin, pay personal credit debts, and other personal uses.
The FTC further also stated that Monahan and the company failed to refund consumers’ funds, despite numerous complaints. The agency notes that the crowdfunder threatened several customers, saying:
“Some consumers have also complained that Defendant Monahan sent threats to try to silence their criticism, including by telling one consumer that he knew where the consumer lived and had other personal information about the consumer, and by threatening to sue another consumer and his employer for libel and slander.”
Monahan started a crowdfunding campaign for the iBackPack back in August 2015 via the Indiegogo platform. However, the entrepreneur went on to launch another campaign for an upgraded version, the iBackPack 2.0, in March 2016, without delivering the first set of iBackPacks.
The entrepreneur ran up to four crowdfunding campaigns, two of which were for a product called MOJO, a shoulder bag with batteries and other electrical features, and POW Smart Cable. All four campaigns yielded over $800,000.
Both Monahan and the company deceived investors by posting false videos about the products and also reneged on their promises. The defendants closed their Facebook account, website and stopped communicating with customers altogether.
Clampdown on Cryptocurrency Fraud
Investors often fall victim to fraudulent entrepreneurs who collect funds and claim to offer bitcoin trading or other virtual currency services.
In November 2018, the U.S. Commodity and Futures Trading Commission (CFTC) fined Joseph Kim $1.1 million and permanently banned the U.S. trader from virtual currency trading.
Investigations by the CFTC revealed that Kim illegally transferred $601,000 worth of bitcoin and litecoin from his employer’s wallet to his wallet. After the company fired him, Kim went ahead to set up a fraudulent trading scheme and defrauded investors of $45,000.
Also, the CFTC won a case against CabbageTech Corp owner, Patrick McDonnell. The agency claimed that McDonnell deceived several investors across different countries, misappropriated funds, and presented false statements.