Smart backpack creator dupes investors of $800,000 in crowdfunding fraud

Key Highlights

 A Texas man, Doug Manahan has been sued by the federal trade commission (FTE) of allegedly embezzling money that he had raised from crowdfunding campaigns to develop new products.

Manahan had reportedly raised more than $800,000 from four different Indiegogo campaigns.

Manahan has come under fire by the FTC as they accuse him of making a large number of false statement to investors about the status of the product development and also to the crowdfunding sites.

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A Texas man, Doug Manahan has been sued by the federal trade commission (FTE) of allegedly embezzling money that he had raised from crowdfunding campaigns to develop new products. The man then failed to deliver the said products and instead used the raised money for personal uses and for creating new marketing strategies to raise even more money. The agency has been in the process of investigating these campaigns since last August when it started receiving complaints from the consumers.

Manahan had reportedly raised more than $800,000 from four different Indiegogo campaigns. He launched his first campaign in 2015, promising to develop a new ‘ibackpack’ which would include batteries for charging laptop and phones, Bluetooth speakers etc. the campaign said that the money raised would go towards the development, marketing and distribution of the said product and the product launch was to take place in March 2016.
However, this launch date was missed and a second campaign was started in March 2016 for raising money for ‘ibackpack 2.0’. More than $72000 was raised by November 2016 from this campaign. The promised backpack was never delivered.

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Around the same time, two new campaigns were started by Manahan for funding a shoulder bag called MOJO and a POW smart cable, a magnetic USB cable. Approximately $11,000 were raised by it. The company’s campaign pages also displayed graphics of the prototype along with a list of its technological capabilities.

Manahan has come under fire by the FTC as they accuse him of making a large number of false statement to investors about the status of the product development and also to the crowdfunding sites. These fake statements include him saying that the products are on their way and will be delivered soon. However, none of the raised money was used for any kind of product development and Manahan used it for his personal needs.

The consumers who invested money in these crowdfunding campaigns had allegedly complained to the sites about the fake promised that Manahan made. Some even stated that they had been receiving threats from Manahan as well.

FTC states that a person that launches such a crowdfunding campaign doesn’t always have to guarantee that his proposed idea will work. However, that money has to be exclusively used to work on the said idea and not be spent personally.

The state of Texas has also filed a lawsuit against Manahan seeking to prevent him and his company from duping the customers of their money which is in the direct violation of deceptive trade practices act of the state. Attorney General Ken Paxton has pointed out that while crowdfunding sites like kickstarter do create opportunities for upcoming entrepreneurs, they are also a hotbed of scamming activities and con artists that are looking to take advantage of consumers. The consumer protection Division has taken action to shut down Manahan and his crowdfunding projects. The lawsuit filed by the state of Texas also seeks proper compensation for the duped consumers, attorney’s fees and civil penalties.