FTC sues 'iBackPack' founder for deceiving crowdfunding backers

The agency believes much of the $800,000 raised was spent on "personal use."

After a months-long investigation into the practices of the crowdfunding campaign for iBackPack, the Federal Trade Commission announced today that it will sue the company's founder for misusing funds provided by backers. According to the agency, project creator Doug Monahan used much of the more than $800,000 raised via Indiegogo and Kickstarter for personal use, including the purchasing bitcoin, making withdrawals from ATMs and paying off credit cards.

The FTC first began investigating iBackPack following a spate of complaints from consumers who supported the project on crowdfunding platforms. Despite a significant amount of funding that exceeded goals set by Monahan, the project missed its promised delivery date, initially set for September 2016. While Monahan assured backers the product was still in the works and an issue with the battery caused the setback, updates on the project ceased in the spring of 2017. Shortly after, the company's website, email address and social media presence were shut down.

When complaints about the delays started piling up, Monahan allegedly started to threaten supporters. According to the FTC's complaint, he told one customer that he knew where they lived and had their personal information. In another case, he threated to sue a person and their employer for libel and slander.

While a small number of iBackPack funders received refunds, most have yet to see their pledges returned. The FTC is seeking refunds for those who backed the iBackPack crowdfunding campaigns and is looking for a "permanent injunction" that would prevent Monahan from ever using crowdfunding again.

"If you raise money by crowdfunding, you don't have to guarantee that your idea will work," Andrew Smith, Director of the FTC's Bureau of Consumer Protection, said in a statement. "But you do have to use the money to work on your idea—or expect to hear from the FTC."