The FTC charged a company and its officer with using customer funds raised through crowdfunding on personal expenses and marketing, rather than the development of several promised products.

According to the Complaint, Douglas Monahan, an officer of the company iBackPack of Texas, LLC, sought funding for the development of several products (such as a "high-tech" backpack) through four crowdfunding campaigns that generated over $800,000. The FTC alleged that Mr. Monahan used the funds on personal expenses and marketing campaigns rather than on actually developing the products. Despite missing delivery dates, Mr. Monahan allegedly continued to make false statements about the status of products. Mr. Monahan is also accused of ignoring refund requests before shutting down the company and subsequently transferring the remaining funds to unrelated companies.

FTC Bureau of Consumer Protection Director Andrew Smith stated that, "[i]f you raise money by crowdfunding, you don't have to guarantee that your idea will work, but you do have to use the money to work on your idea - or expect to hear from the FTC."

Mr. Monahan was charged with violating Section 5(a) of the FTC Act.

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