[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.