[bransonf]

If you give $700 to a company that promises to deliver a scooter, and they spend that money on advertising, that’s fraud.

They have no plausible argument that they didn’t know they couldn’t deliver or refund customers after they started spending pre-order funds.

I hope customers get successful chargebacks and there’s a class action lawsuit. This wasn’t a crowdfunding campaign. Consumers were lied to, and the law should make clear that this is unacceptable business practice.

[flyGuyOnTheSly]

You're not wrong, you're an idealist, which typically are very closely intertwined when it comes to reality.

If you gave $700 to a company who promised to deliver you a scooter a few years down the line if all of the dominoes fell exactly as planned... I would argue that you got what you paid for even if it amounts to nothing tangible in the long run.

Which is to say, you paid for a pricey digital lottery ticket with a very low potential ROI.

It's a crying shame, absolutely.

But it's nothing to burden the court systems with.

[johnfactorial]

> If you gave $700 to a company who promised to deliver you a scooter a few years down the line if all of the dominoes fell exactly as planned... I would argue that you got what you paid for even if it amounts to nothing tangible in the long run.

Is that what happened with this company? That's the model of kickstarters and the like, but this story sounds like it was a real company offering a product for sale. If a company can form, offer a product, sell 350 units, pay employees & expenses, then fold without delivering product or refund, nor facing any legal repercussions, what's to stop the same employees and founders from following that method ad infinitum? Form company #2, offer a different vapor, take in money from sales of the never-to-be product, spend it on salaries, declare that the product won't be delivered nor refunds given, and move on to company #3. If that's what this company has done, and the court systems are never burdened with tackling such an issue, it is a viable if entirely unethical model for the people involved.

[ghshephard]

You don't really "sell" products on kickstarter, you try and convince people that you'll actually follow through on your vision.

I've backed a dozen or so, and I've got about a 50% hit rate of anything coming through. The failures are always interesting. Trying to guess, ahead of time, which ones are failures (or scams) - is an education into itself. They always seem so earnest in the beginning.

But, yeah - go into kickstarters with your eyes open. Particularly with people who don't have a track record of deliverying - that, in my mind, is the best signal around. If they've come through more then 3 or 4 times in the past, that's a good indication they may come through on this one.

[alistairSH]

You don't really "sell" products on kickstarter,

The link doesn't mention Kickstarter at all - I assumed Unicorn was selling through their own website?

[djshelleyshell]

Correct. This was not a Kickstarter or anything like it. They represented like they had product at the time that I ordered.

[mrandish]

Then you have a legitimate claim. Unfortunately, it sounds like you are an unsecured creditor, thus you can get in line at the bankruptcy hearing (metaphorically speaking) but you are going to be second to last in line after the secured creditors, employee wages, taxes, etc thus are not likely to see anything.

[noonespecial]

I consider kickstarter an entertainment product. You pay to watch and participate a bit. The physical product/non-product at the end is part of the "story".

[braindeath]

> real company

This is a bit nebulous. Every consumer, especially where the expense is a lot of money for them would do well to give this idea more thought.

A pretty website, a few employees and some prototypes doesn’t hit a meaningful bar, let alone millions of dollars in capital (which this joint didn’t even have), TBH. Too bad fuckedcompany is no longer around, it did a great service.

[jascii]

Prototypes? This company was essentially selling a rebranded Segway ES2.

https://www.bizjournals.com/sanjose/news/2018/06/25/segway-n...

[braindeath]

How is that link related to this company? Do you have some information they were even the same supplier?

Regardless, doesn't change my basic point, which is that "real company" is a nebulous concept and not prudent for a consumer. My neighbor's venture without even a business certificate may be a more "real company" because if he fucks me over he has at least has to see me everyday for years.

[jascii]

Your right, I copied the wrong link.. This article touches on the subject: https://www.theverge.com/2019/6/20/18691357/unicorn-electric...

I agree with you and didn't mean to dispute your point, just add to it.

[jberm123]

>what's to stop the same employees and founders from following that method ad infinitum?

Informed consumers

[TeMPOraL]

Part of the task of marketing is to disinform customers. Companies existing to scam people are necessarily marketing-heavy.

[flyGuyOnTheSly]

>Companies existing to scam people are necessarily marketing-heavy.

Consumers can absolutely that.

I certainly have.

If you're screaming in my face and hurrying me along to pull out my wallet and buy something ASAP, 99 times out of 100 it's a scam.

[sieabahlpark]

I didn't realize scamming was a legal business venture.

[lotsofpulp]

Depends who you’re scamming. Quite a few powerful and rich people who I would classify as being “scammers”, but their victim is usually a group of people such as taxpayers.

[jberm123]

Did I say I support scamming?

[mehhh]

Plenty of companies never deliver a product, hence chargebacks being built into our credit & debit systems (and being available for checks in a restricted form)

[johnfactorial]

Informing all consumers in the market is not a legitimately accomplishable solution to the problem. As long as there are 350 consumers unaware that these people have done this before, and they never have a day in court over it, this story can repeat itself forever.

Maybe informed lenders is a solution, though.

[jberm123]

Assuming this is as easy as you make it out to be, don't you think it would be relatively easy to host this scam business' site offshore/anonymously and scam people outside the jurisdiction of the US courts?

[mcbuilder]

"There is a sucker born every minute"

[djshelleyshell]

I don’t think I’m a sucker for ordering a product promised to be in stock.

[jberm123]

I don't think you are either. But it's a risk you're taking buying a product from a fledgling internet-based startup. Shall we make it easier to start an internet-based business over a brick and mortar shop with laws that benefit the former with the latter's inherent advantage?

[hodgesrm]

They were taking orders and spent the money on something other than delivery, hence could not deliver to creditors. In the UK (where my current company is incorporated) this would make the company insolvent under the Insolvency Act of 1986. It's against the law to operate in this state. [1]

We have to sign documents that assert our finances are in good order for this reason. Violating the law subjects you to various penalties. I'm not eager to find out what they are.

https://en.wikipedia.org/wiki/Insolvency#United_Kingdom

[ansible]

Yeah, I don't understand the craze with all the kickstarters.

I've backed a few here and there. Two of them I knew the principals for a while before the kickstarter began.

And I supported them at a level I considered a donation, so that if I never received anything, that's OK.

Another I backed (ReSpeaker from Seeed Studios) I did because we were interested in it for a project at work, and it was convenient for me personally to back it. And they did (eventually) deliver, which I had a reasonable assurance of because I'd bought from Seeed before.

If you want to back a game or something at a reasonable level (like $40), that's fine.

I did almost back Tilt-5, but ended up not doing so, not because of any concerns about the company, but concerns about my time that I'd have to mess around with it when I got it.

[com2kid]

> Yeah, I don't understand the craze with all the kickstarters.

It used to be they were a cool way to get access to products that were otherwise unavailable.

1. I got some amazing desserts from around the world that no way would have been able to try otherwise 2. Limited production run clothing using experimental materials 3. Stick on Cell phone microscope lens! The ones I got were before they became a common thing, and they were a small batch production run 4. Board games that are only ever sold through kickstarter.

Now days kickstarter is a lot less fun, it used to be I could go browse local projects and find a ton of local creators to support, lots of kids out of school trying to make their first video game, local board game designer wanting to release his/her dream, that sort of thing. Now days I find a lot less of those quirky fun projects, which is sad.

I never expected anything to arrive on time (software!) and it is pretty easy to spot a hardware project that is going to fail, e.g. if the amount of $ a team wants to raise to make a smartwatch is less than a single run of tooling to make a smartwatch, it is obvious the team doesn't know much about manufacturing! (Though now days outside investors are pulled in after a successful Kickstarter demonstrates interest).

I also got one of those cool track-belts before they became easily available in the US, and I got this obscenely overpowered LED light bulb that I can't actually use anywhere because it is too bright!

Still sad I never got my glow in the dark plants though, that project is what first got signed up for Kickstarter.

[TeMPOraL]

> (Though now days outside investors are pulled in after a successful Kickstarter demonstrates interest).

This was happening probably since the very beginning. Around 2013, I did independent technical evaluation of a certain hardware startup on behalf of a local accelerator, and one of the things I've learned is that the startup in question had some funding that was conditioned on the success of their Kickstarter campaign, which was meant to feel out the market.

[com2kid]

True enough, but it has become a much bigger thing now. I've even seen a couple kickstarters showing their funding split on their kickstarter project page between investors and kickstarter funds.

The level of professionality in modern kickstarters is a bit of a turn off really. Seeing massive slick ad campaigns for a kickstarter isn't exactly a sign of authenticity.

But then again if those ads have a positive ROI I totally get it.

[TeMPOraL]

I do feel the same way. I used to casually browse Kickstarter, but don't anymore.

[kelnos]

ReSpeaker was a shame, though. The v1 hardware was horrifically unstable (and then they quickly moved on to v2 and swept v1 under the rug). But, I went into it with the expectation that things might work out, so, while I was disappointed, I knew that was a possibility from the start.

[djshelleyshell]

It wasn’t a Kickstarter though.

[dmix]

Indeed, how many Kickstarter projects will it take to convince people preordering on an unsure thing is a gamble and basically an investment in an idea that interests you.

Tons of billion dollar projects, let alone those with only a few million, have been delayed for years, changed half way through, or have died before finishing.

The failure rates for new businesses is pretty high, 50% in the first year.

One could question if its moral to take early preorders without some form of insurance but at the same time a ton of good things have come about using this process and proper communication by the company/purchasing platform can mitigate most of these issues.

Plus it’s pretty rare for people to being giving hundreds of dollars, let alone almost $1000, to an unproven product so it’s probably best not to judge based on the extremes.

Obviously if shady stuff is going on and there’s some evidence the company didn’t meaningfully try to accomplish the goals for which it raised money and misused company funds for personal benefit then there’s a serious problem. There's plenty of laws in place for that already.

[braythwayt]

> preordering on an unsure thing is a gamble

Even though you are trying to warn people, you've accidentally fallen into Kickstarter's "dark pattern in broad daylight" by using the word "preordering."

Kickstarter donations (I consider it a charity) are not pre-orders. If I preorder a book on Amazon and it is late, tough for me. If the publisher closes down, Amazon gives me my money back.

Kickstarter donations, on the other hand, don't even have that recourse. We're giving them money out of the goodness of our hearts, and if everything works out for them and they feel like giving us our reward, we receive a nice "thank you gift."

Kickstarter transactions are charitable donations. We don't get a tax receipt, but if things line up, we do get a reward. If we think of it as charity without the tax benefits, we won't go wrong.

But the moment words like "preorder" or "purchase" enter into the conversation, we've fallen into the trap of thinking that we're consumers purchasing a good or service.

[nickphx]

Amazon only charges you when the pre-ordered item ships. :)

[djshelleyshell]

This was not a crowdsourcing product. I ordered two scooters because they were advertising scooters for sale. Nothing in my purchase order stated that my order wouldn’t be filled immediately. It was once they had my money that they kept pushing the date back for shipping.

[StuffedParrot]

There’s large differences between bad luck, failed plans, mismanagement, and fraud. It’s optimistic to assume the best of the person who raised funds.

[dmix]

A misguided marketing strategy isn't fraud. That doesn't sound like deceiving people for personal gain by itself.

Unless the whole plan was to sell preorders and feigning failure in order to take the funds. But that's a serious claim and it could be grounds for an investigation if law enforcement was pressured. But it would take more than complaining about FB ads.

[filmgirlcw]

>A misguided marketing strategy isn't fraud. That doesn't sound like deceiving people for personal gain by itself.

Quite right. It's potentially an dereliction of duty and could be seen as being dumb enough that shareholders in a company could force an officer out (of course, here it doesn't matter b/c the company is bankrupt), but unless you can prove malice or untoward gains (like, the person making the Facebook buys was getting a cut from Facebook or money was being funneled from the ad buys into someone else's pockets, which does NOT appear to be the case here), there is no fraud.

When a company is going bankrupt, the best that can be done is that the backers can try to fight to be higher on the creditor list to get whatever scraps are left (assuming any scraps exist at all).

[kjs3]

All completely correct but I'm unclear who the shareholders are here (other than the CEO/douchebro). Certainly not the people who are out $700. Not fraud, just "My bad. Screwed you. Maybe next time.".

[acchow]

You are conflating venture capitalists with consumers.

[Someone1234]

A class action lawsuit against who? You cannot sue a company that no longer exists. It is unlikely consumers would be able to defeat limited liability, particularly with the argument that "the company should have allocated resources differently."

[richardwhiuk]

If you could prove deliberate fraud, which seems unlikely, then you could probably pierce the limited liability shield.

Seems unlikely though.

[paulddraper]

Yes, LLC don't protect from many criminal charges such as fraud.

It would indeed be difficult to prove this was deceptive and not just really poor, even idiotic, business planning.

[kjs3]

Indeed. Sadly, stupid isn't (usually) criminal.

[Enginerrrd]

It might not be that unlikely... For example, it's possible they don't have the advertising invoices to back up the claim that that's where the money went.

It is, however, very unlikely that anyone ever gets their money back.

[bransonf]

An LLC does not protect one in cases of fraud. IANAL, but I believe the practices of Unicorn may constitute fraud under a legal definition.

In such a case, Nick Evans would be personally liable for damages.

[Someone1234]

Sure, but nobody has given an example that would be considered fraud. "They spent too much on marketing and not enough fulfilling orders" isn't in itself fraud, just a badly run business that is now bankrupt as a direct result.

If the bar for fraud was set that low, I bet half of failed startups would be considered "fraudulent." More than half if you look at restaurants.

> Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage.

Unless you have some damning email or other disclosure you'd never be able to prove that they knowingly sold scooters they never intended to fulfil, therefore fraud is out. In fact all the evidence seems to indicate the opposite, that their long term goal was to make this a successful business and grow until the money ran out.

[bransonf]

On 11/13 they promised to be preparing to start deliveries on 12/15.

If at this point they had not made an effort to reach this goal (placing an order with the manufacturer for example), that is a misrepresentation of fact.

Fraud doesn’t imply malice. They could have jumped the gun on announcing they were preparing to deliver, but doing so would still constitute fraud, especially if this drove an increase in orders.

[Someone1234]

> Fraud doesn’t imply malice.

Legally it does. The discussion was about using lawsuits to break Limited Liability. In that context malice is absolutely required to stand a shot at winning.

> They could have jumped the gun on announcing they were preparing to deliver, but doing so would still constitute fraud, especially if this drove an increase in orders.

There's a large problem with this argument, by the time that delivery "promise" had occurred the exchange of money had already happened. Fraud occurs when someone receives something, through deception, that they wouldn't have otherwise received. By the point of this claim the exchange had already taken place, and therefore the claim didn't indice anyone (i.e. they didn't gain additionally from it).

I think it boils down to people conflating "right and wrong" with "fraud." Nobody is saying this business was run well or they didn't do wrong by their consumers. What we're discussing is the legal definition of the term "fraud" and if a hypothetical lawsuit would be winnable.

[filmgirlcw]

If they were still accepting new orders on 11/13 under those promises, that might be fraud. But any of the older backers wouldn't fall under that.

You would have to prove that when the statements to prepare delivery for 12/15 were made, the company had absolute knowledge that no future funding was going to come and that it was guaranteed that they were lying.

If the company was in talks with other investors and thought it might be able to raise in order to ship what was necessary, that's not fraud. That's bad business and everyone should be weary/stay the hell away from any future venture from this place, but that isn't fraud.

[lsiebert]

I'm not a lawyer, but I believe you could argue that such a statement was intended to keep people from doing charge backs or demanding refunds. In any case you probably have enough to begin discovery, and given the cost of a lawsuit and the embarrassment of what that might uncover, the people behind the company may decide it's easier to settle.

[amirhirsch]

The reason to use crowdfunding platforms like Indiegogo or Kickstarter is because you are not liable to pay people back who give you money for your project. By accepting credit cards directly you forego this release from liability. Not only is there personal liability for damages, there would also be a criminal investigation. Lily Robotics had a similar situation. A warrant had been served to collect information for a criminal investigation, but Lily paid everyone back since they held all the money separately.

It is fraudulent to take payment and not deliver product regardless of the intentions of the founders to be successful. Lacking mens rea, perhaps makes it a misdemeanor instead of felonious, but courts will push the founder all the way to bankruptcy and potentially to jail if they cannot repay damages.

Seems like other comments may not understand what constitutes fraud. I have experience with this situation and discussed it with my lawyer when my company eschewed kickstarter/indiegogo and opted for direct sales instead. We even used our rejection of crowdfunding for PR to boost sales (thanks techcrunch!). Our sales spike was such that PayPal held our money in reserves, which led me to take on all sorts of awful loans to pay for scaling production and made for a slow and painful fulfillment process.

[toomuchtodo]

You sue the corporate officers, and it's up to them to find someone to defend them in court.

[Someone1234]

You can quite literally sue anyone for anything. But lawsuits aren't free, and the law isn't on the claimants side here, so they'd lose.

So, sure, sue away it is just even more money lost and likely still no scooter or refund to show for it.

[toomuchtodo]

> the law isn't on the claimants side here, so they'd lose.

That's up to a jury, not an online forum.

[filmgirlcw]

But the broader point about lawsuits not being free is valid. Because in addition to filing fees, you need to pay lawyers to do this. And I am not a lawyer, but I don't know many good lawyers would would take on a case to go after a bankrupt company that has no assets. And even then, those good lawyers are going to want a retainer and multi-hundred dollar an hour fees to do the work, so sure. File a lawsuit. Spend tens of thousands of dollars to get a judgment that the defendant can't pay. What good does that do?

Like, to be clear, if you have more money than God and want to spend time making a point, I'm all for it. You do you. But most people don't have that much money or time to piss away when there is nothing to be gained from the exercise.

[toomuchtodo]

Less solid cases have been taken on contingency. No need to have "more money than God", just a strategy and someone willing to take on the risk.

[Someone1234]

It would never go to a jury. The claims of fraud to penetrate limited liability would be thrown out by the judge for having no legal grounding, then they would be stuck suing a limited liability company with no money.

[paulddraper]

More probably it'd be up to a judge who would throw it out.

[koolba]

Why would anyone do this when you can get what seems like the same scooter for $300? Isn’t this the same as those Xaiomi (spelling?) scooters I keep seeing for sale?

[djshelleyshell]

I liked the scooter. I liked the bells and whistles. Just because the scooter is more expensive than another, doesn’t mean I should be screwed.

[crystaln]

Not fraud just bad business. If they spent the money in good faith expecting to make a profit, it is just bad business.

[justaguyhere]

It might be better to have higher/stricter standards than suing them after the collapse. For example, some rules around how much of the raised money they are allowed to spend on advertising, forcing them to post monthly financial statements (so any money mismanagement is caught early) etc - something like that. This might improve the quality of companies attempting such projects.

Litigation is expensive - plus, 150K isn't that big of an amount in the larger scheme of things. This isn't Theranos level fraud, assuming it was a fraud and not just incompetence/inexperience

[just_myles]

You're not wrong. They should have focused those monies on building the actual product first and then shipping it. At that point, once the kickstarter units are built and shipped, grow your business accordingly. To have nothing to show for the efforts is deplorable.

[maximente]

there (allegedly) isn't any $ left to gain for a class of plaintiffs from the defendant, so a class action lawsuit is pointless

[EpicEng]

If it were found to be fraud then you would be going after the officers of the company directly.