Crowdfunding website Indiegogo has responded to proof of fraud by removing the section of its website that guarantees it will "catch any and all cases of fraud".
Currently seeking funding on Indiegogo is what seems like a wonderful product: a wristband called Healbe that counts your calories. It's raised nearly US$1 million using the website's "flexible funding" options (which means all funds go to the campaign, whether the goal is reached or not), but there's a big problem: As website Pando investigated, according to science, Healbe doesn't work. It can't work.
When confronted with this evidence, however, rather than suspend the campaign, Indiegogo took a novel approach. It changed the wording of the section of its website that explains how Indiegogo deals with fraud to remove the guarantee that fraud will be caught.
Indiegogo has a comprehensive fraud-prevention system to protect our users. All campaigns and contributions go through a fraud review, which allows us to catch any and all cases of fraud. If we find fraudulent contributions on your campaign, we may remove them from your campaign Funds and Fulfillment pages. We may also ask you for more information, if we determine your campaign to be a high fraud risk. Finally, all campaigns that raise money go through a final examination before any funds are disbursed.
The new version reads:
Indiegogo has a comprehensive fraud-prevention system to protect our users. Campaigns and contributions that have been flagged by our fraud detection system go through a thorough review. If we find fraudulent contributions on your campaign, we may remove them from your campaign Funds and Fulfillment pages. We may also ask you for more information, if we determine your campaign to be a high fraud risk. In a final step, we perform an examination before funds are disbursed.
On its face, this may sound reasonable. One cannot expect, with a crowdfunding site the size of Indiegogo, that it will absolutely catch each and every case of fraud.
However, it seems troubling when this action is taken directly after a fraudulent project is flagged with the website.
This is not an isolated incident, either. The campaign in question was emailed to CNET Australia as part of a newsletter that highlights campaigns Indiegogo believes warrant coverage. In that same email was a product called the Smarty Ring, which ended up raising US$100,000 of its US$500 goal.
The problem, however, is that this product also cannot work as advertised, as uncovered on Drop Kicker by a user called choof. When queried by CNET Australia on this, Indiegogo replied, "Due to its social and democratic nature, crowdfunding is inherently a deterrent to fraudulent activity because it's up to the crowd — often thousands of people — to help monitor and give feedback on campaigns. That being said, Indiegogo takes trust very seriously so it has built an algorithm that allows it to flag potentially fraudulent campaigns, not unlike the systems that credit card companies use to detect unauthorised purchases."
Indiegogo's actions in both of these cases seem inconsistent with its words.
Kickstarter is also far from perfect, but in 2012 that website added a policy disallowing product renderings completely in order to prevent misrepresentation. Since then, Kickstarter has seen a decline in fraud.
All images of the Healbe and the Smarty Ring are renderings.