Operator of Deceptive Crowdfunding Scheme Banned from Future Crowdfunding as Part of FTC Settlement

The operator of a deceptive crowdfunding scheme will be banned permanently from engaging in crowdfunding activities as part of a settlement with the Federal Trade Commission over allegations that he used contributors’ funds on himself rather than to deliver the high-tech backpack he promised.

In its complaint, the FTC alleged that Douglas Monahan, operating through his company, iBackPack of Texas, LLC, raised more than $800,000 from consumers through four crowdfunding campaigns. According to the FTC, Monahan falsely claimed the funds would be used to develop a handful of products, including an “iBackPack” that would incorporate batteries for charging laptops and phones, cables, and a Bluetooth speaker. Despite his reassurances to contributors and the crowdfunding platforms Indiegogo and Kickstarter, the FTC alleged Monahan never delivered any of the promised products and instead used the money he raised for personal expenses and marketing.

“Crowdfunding is a legitimate way to raise money for your business venture, so long as you use that money for the business and not yourself,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “When companies like iBackPack misuse the money they raise, that’s when the FTC steps in.”

As part of the settlement, Monahan is permanently banned from engaging in any future crowdfunding activities and from misrepresenting his ability to deliver any good or service or the terms on which he will provide a refund. In addition, he has agreed to a judgment totaling nearly $800,000, which will be suspended due to Monahan’s inability to pay. The entire amount will be due if he is found to have misrepresented his finances.

The Commission vote approving the stipulated final order was 5-0. The FTC filed the proposed order in the U.S. District Court for the Southern District of Texas, Galveston Division. NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.