Don't Get Caught in a Crowdfunding Scam!

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Since the evolution of crowdfunding, giving to charity hasn’t been the same. Platforms like Kickstarter, Indiegogo and GoFundMe have democratized fundraising, enabling creators to connect directly with potential backers and raise enormous sums of money in a short amount of time. However, this accessibility also opens the door to increased fraud. Here’s how crowdfunding scams play out and how you can protect yourself from falling victim to one of these ruses.

What are crowdfunding scams?

There are several ways crowdfunding scams can play out:

Non-existent causes. One of the most common forms of crowdfunding scams is when fraudsters create fake charitable campaigns, exploiting donors’ goodwill by fabricating heart-stirring stories or emergencies to solicit funds.
Unrealized projects. Scammers propose innovative products or services, collect funds from backers, and then fail to deliver, often disappearing along with the money.
Fake organizations. Here, individuals impersonate legitimate charities to deceive donors into contributing to bogus entities.

Recognizing crowdfunding scams

Look out for these red flags, which can alert you to a crowdfunding scam:

Lack of transparency. Legitimate campaigns will provide detailed information about the project, including goals, timelines and the team involved. A campaign that withholds these details or offers vague explanations may be suspect.
Unrealistic promises. Be cautious of campaigns that promise extraordinary results or rewards that seem disproportionate to the pledge amounts. Remember the golden rule: If it sounds too good to be true, it probably is.
Pressure tactics. Scammers love to create a false sense of urgency, urging you to act quickly to secure a deal or support a cause.
Limited online presence. An authentic campaign organizer should have an established online presence. If you cannot find information about the creator outside the crowdfunding platform, proceed with caution.
Suspicious payment methods. Requests for direct payments, especially through untraceable methods like wire transfers or cryptocurrency, are a significant red flag. Reputable campaigns typically use the platform’s payment system.

Protecting yourself

Don’t get caught in a crowdfunding scam! Before you donate, review the following:

Who is the campaign organizer? If the details are sketchy and/or you can’t find the street address or phone number of the organization, it’s likely a scam.
What do the reviews say? Look for discussions or reviews about the campaign on forums, social media or consumer protection websites. It’s also a good idea to search the name of the organizer along with words like “complaint” and “scam”.
What’s the purpose of the campaign? Next, clarify the purpose of the campaign. If it’s not completely clear, it may be a scam.
Is the project overly ambitious? Evaluate whether the project’s goals are achievable given the team’s experience and the resources available. Unrealistic projects are more likely to fail or be fraudulent.
Is the platform legitimate? Ensure that the crowdfunding platform is reputable and has measures in place to detect and prevent fraud. Familiarize yourself with their policies on fraud protection and fund disbursement.
Does the campaign have open lines of communication? Legitimate campaigns maintain open lines of communication with backers, providing regular updates and responding to inquiries. A lack of communication or evasive answers can be indicative of a scam.

If you suspect a scam

If you encounter a suspicious crowdfunding campaign, there are steps you can take to mitigate the damage. First, use the crowdfunding platform’s reporting mechanisms to alert them about the suspected scam. This helps protect other potential backers. Next, notify the proper authorities to aid in investigations. In some jurisdictions, you can report online scams to consumer protection agencies or fraud reporting centers. Finally, share your experience with family and friends to prevent others from falling victim to the same scam.

Don’t get caught in a crowdfunding scam. Use the tips here to stay safe!