

Kickstarter project raised $196K and stopped responding - mkhaytman
http://www.kickstarter.com/projects/crypteks/crypteks-usbtm-encrypted-and-lockable-usb-solution/comments

======
hop
Im a backer and they offered refunds twice to anyone that wanted it so I don't
know why anyone is complaining.

This project was before Kickstarter disallowed renderings (for good reason)
and they would probably never have gotten to this shitty position if they had
to actually prototype it and find out how insanely expensive it would be to
manufacture.

~~~
breadbox
The complaint says that they have not actually given out the offered refunds.
Is that not true?

~~~
tekacs
See the project updates page[1] for an update called 'Refund Process' and
indeed a 'Refund Reminder'. :/

[1]: [http://www.kickstarter.com/projects/crypteks/crypteks-
usbtm-...](http://www.kickstarter.com/projects/crypteks/crypteks-usbtm-
encrypted-and-lockable-usb-solution/posts)

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Udo
The expectations some people have about crowdfunding are unrealistic. It has
to be clear from the start that when you donate money to those projects the
money will be spent and the project might fail anyway. People have been using
Kickstarter as a pre-order site which I think is not ideal in many cases. The
option to preorder should be different from supporting a project in general,
but Kickstarter sadly doesn't offer that kind of separation.

~~~
incision
_> People have been using Kickstarter as a pre-order site which I think is not
ideal in many cases._

Kickstarter backs this perception.

"In just 24 hours, 20,000 people _bought_ an Ouya console — a product they had
never heard of before yesterday." - Yancey Strickler - Cofounder/Head of
Communications at Kickstarter [0]

0: <http://www.kickstarter.com/blog/ouyas-big-day>

~~~
forrestthewoods
Kickstarter is trying very hard to NOT back that perception. They have and
continue to make changes to make it clear that Kickstarter is not a pre-order
site.

"Kickstarter is Not a Store" - <http://www.kickstarter.com/blog/kickstarter-
is-not-a-store>

~~~
makomk
Kickstarter tries very hard to backpedal on that perception when it's about to
blow up in their face. They made that "Kickstarter is Not a Store" blog post
and the associated policy change after the press showed interest in the seedy
side of Kickstarter; I forget what the exact catalyst was because it was some
time ago.

~~~
incision
_> I forget what the exact catalyst was because it was some time ago._

As I recall, the main Kickstarter hoopla going on at that time was Lifx [0].
Also, September 2012 was the original delivery date for Pebble [1].

0: [http://blogs.reuters.com/felix-
salmon/2012/09/18/kickstarter...](http://blogs.reuters.com/felix-
salmon/2012/09/18/kickstarter-vaporware-of-the-day-lifx-edition/)

1: [http://www.kickstarter.com/projects/597507018/pebble-e-
paper...](http://www.kickstarter.com/projects/597507018/pebble-e-paper-watch-
for-iphone-and-android)

------
bbx
The project has reached a $196K funding while the initial goal was "only"
$12K. Maybe Kickstarter should limit the amount of money to this initial goal,
or at least to twice the amount of this goal.

If a project looks promising, more people are likely to pledge for it. But if
Cryptrade thought $12K was enough to develop their project, that's probably
all they actually needed. And $12K is both less tempting for Cryptrade to just
disappear and less penalizing to everyone who pledged for the project.

~~~
minimaxir
Since Kickstarter gets a 5% cut, they have no incentive to limit the amount of
funding.

~~~
officemonkey
They have a huge incentive to keep backers comfortable with using Kickstarter.
Too many "scamstarter" projects and it's their brand which takes the hit.

~~~
nightski
This makes no sense. If you are concerned, don't back a project that is
already 100% funded...

~~~
nightski
I don't understand the down vote. People actively choose to back projects that
are past 100% funding. This means they want to participate. Setting an
arbitrary limit in order to protect people seems ridiculous when the
information about funding levels is right there, in real time. How is
contributing when the project is at 150% funding any more risky than when it
is at 50%? You are still in for the same pledge amount.

~~~
avalaunch
The only legitimate concern I could see is that by allowing projects to fund
well over 100%, you're potentially increasing the risk to all backers as an
easier to manage 12k project balloons into a very complex and potentially hard
to manage 200k project.

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k-mcgrady
There is a simple solution to this problem. Don't allow project creators to
offer the project as a reward! It should be ok for people to try and fail with
projects on Kickstarter. By preventing creators from offering the product as a
reward backers will understand better that it isn't a pre-order system. It's
an "I need money for this idea. It might work or it might fail but if you want
to help me try, give me money" system.

~~~
mkhaytman
Unfortunately, this project creator hasn't provided any proof that the money
was spent working on the product. If there were photos and records of work and
progress being attempted, and at least some communication with the backers
along the way, I suspect the tone and deposition of the comments would be
different.

It's a lot to read through, but there's pages of people just asking for
transparency to see the status and to understand what challenges were coming
up. There's just as many comments from the creator that things are going great
and we should be ready to ship in no time at all.

Trying out a new project or product and failing is one thing, never attempting
it and running off with the cash is a different matter entirely.

~~~
k-mcgrady
I agree that they should be posting updates to prove the money is being put to
use. However looking through the comments I see a number of people referring
to the backing as a 'loan' and complaining they didn't get the product 'they
ordered'. I think it's clear this 'company' has screwed people but backer
expectations are also completely wrong and Kickstarter needs to solve that
problem. People seem to think if they give you money and you fail they can get
a refund. That's not how Kickstarter works/should work.

------
alexchamberlain
_Part of their description was the following...

Is the Crypteks USB™ Patented? Definitely! Patents covering the unique locking
mechanisms as well as iterations for future implementations of varying
possible internal electronics have been filed with the USPTO with
international coverage. Crypteks Inc. reserves all rights with respect to the
use of Logos & Slogans as well as the design concepts and iterations covered
under our patents_

Do these patents actually exist?

~~~
imroot
Crypteks, Inc has a few patents (mainly dealing with network security), but
nothing patented for the USB key.

<http://1.usa.gov/14l68Uj>

~~~
UVB-76
Does that database display pending patents? It seems to me they are claiming
to have patents pending.

~~~
wmf
I don't see any relevant applications in the database, but applications are
only published ~18 months after filing so there may (barely) be some lurking.

------
will_brown
Notwithstanding all the hype and legitimate positives of crowd sourcing, this
is the very real negative side. Kickstarter gives unfettered access to funds,
which more often than not is required by a given project, and they indemnify
themselves and further remove themselves from the funding transactions (a
legal requisite for anyone not wanting to be tied up in litigation for the
rest of their known life). Perhaps there is some room to hold funds in escrow
and release them after projects hit certain mile stones, but I think that
would stifle projects more than ensure successful use of funds. This is a real
problem facing an emerging industry that if someone figures out they could
propel themselves to the forefront of this space.

~~~
jdechko
Maybe even only release 50% of the funds initially and hold the rest in escrow
until a given set of circumstances are met. That way the users are exposed to
less risk knowing they could get half of their funding back.

On the downside, if this keeps happening, users aren't going to back as many
projects, and fewer projects will be successfully funded (which may or may not
actually be a bad thing).

~~~
giovannibajo1
If you go down this road, just let project creators decide their milestones
and timing, and then release the funds. Different projects have different cash
flow problems, so each creator should be able to decide.

Want all money upfront? Fine, but people will know and decide accordingly
whether to back your project.

~~~
k-mcgrady
The problem here is what to do if you estimate the milestones wrong. People
backed it under those terms and you supposedly can't change the terms after
they give you money.

What if your initial expenses are higher than thought but you can't access
your next milestone for 4 weeks meaning you miss important deadlines with
suppliers/manufacturers and the company goes bust, just because you couldn't
access the money people pledged in time.

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ipsin
It's unfortunate that all the updates are Backer-Only, including a recent one
titled "Refund Reminder".

Could someone on HN who backed this project summarize what the company has
said in its Backer-Only communication?

~~~
reustle
I really wish kickstarter didn't hold project updates to backers only. I'd
love to see some of the updates before I donate to a project.

~~~
batiudrami
It's the project creator's choice. They're frequently viewable by everyone.

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qdog
Hmm, once having worked on a USB device that had encryption on it, it required
an ARM chip and a circuit board running a custom software stack. Even if the
creator thought they were going to create one of these, for their original
target of 12k I don't think they had a clue about what they were doing.

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mkhaytman
This project has been funded for a year and half with no progress to show for
it, only thousands of comments from backers wondering when they will receive a
refund or at least an update on whats going on.

Unfortunately the project founder has flown the coop and kickstarter doesn't
claim a lick of responsibility. Want to get away with stealing 200k? Just make
a kickstarter project and never deliver, it's working for these guys.

~~~
zokier
Are failed startup founders also stealing millions of VC money? KS is a risk-
investment, not a preorder webshop.

~~~
srumple
But startup founders are accountable to the VCs. They have to provide updates
and let the VCs know what it is they've been doing with the money. If the KS
project fails, it fails. But to not provide some sort of update to backers is
a serious problem.

~~~
mkhaytman
Yes, this was my main point here. It's difficult to get that across without
writing an entire article for context, and now that ycombinator mods have
edited the title its even less clear.

The founders of this project did little more than sign on once in a while to
say "its not ready yet, but should be ready soon". Now they've disappeared and
there's no accountability for all that money. As an investor, I would at least
like to learn from this experience and see where it went wrong and what could
have done better. Instead the only lesson I can take away from this is don't
trust strangers on the internet.

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uptown
I'm surprised this isn't a more-common outcome of things on Kickstarter. Seems
like the perfect "market" to peddle vaporware without consequence.

~~~
fuzzywalrus
After a few bad projects like this, Kickstarter now has the following
disclaimer and new hardware guidelines

"Product simulations are prohibited. Projects cannot simulate events to
demonstrate what a product might do in the future. Products can only be shown
performing actions that they’re able to perform in their current state of
development. Product renderings are prohibited.

Product images must be photos of the prototype as it currently exists."

<http://www.kickstarter.com/blog/kickstarter-is-not-a-store>

Also see: [http://blogs.reuters.com/felix-
salmon/2012/09/18/kickstarter...](http://blogs.reuters.com/felix-
salmon/2012/09/18/kickstarter-vaporware-of-the-day-lifx-edition/)

~~~
jlgreco
Product renderings are prohibited.. but I wonder if photographs of cleaned up
3d prints of those same files would be permitted.

~~~
Zenst
Bit like showing the full walkthru of a 3D modeled house all nicely rendered,
without having actualy built the house type approach?

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mratzloff
The video features F. Komaya, Product Development Director at Bitwize SARL and
Lead Designer for Crypteks Inc.

Bitwize is a web design company in Lebanon.[1] Sorry, but I'm not going to be
sending money to someone in Lebanon no matter how good the CAD renders look.

[1] <http://www.linkedin.com/pub/bitwize-sarl/62/b19/256>

~~~
kissickas
Why not? I honestly have no idea what point you're making.

~~~
mratzloff
Hezbollah.

But I was also under the (incorrect) assumption that if the project is in the
US that I as a US citizen would be able to file a claim in small claims court
across state lines in my own jurisdiction should the Kickstarter project owner
fail to deliver on his end of the contract.

A contract is largely useless if you have no practical recourse in the event
of fraud.

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lazyBilly
A former acquaintance of mine (and noted scumbag) recently pulled this scam
for a movie he made about (and with the backing of) a bunch of chiropractors.
Raised over a quarter of a million dollars. He's since absconded with the
funds to pay for his mansion/porsche, sent no dvds, and is now funding the
sequel via Indiegogo.

I have always admired the man's ability to sniff out a good con, although the
second film is having quite a bit of trouble getting a similar level of
traction. I'm sure he'll be fine-- it's hard enough to get the government
involved in regular fraud, let alone... whatever dubious legal standing
funding a Kickstarter has.

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quackerhacker
All the projects resources went into the pitch video...not a cent went to R&D.
Even though crowd sourcing is awesome in my opinion, just like any investment,
it comes with a risk.

Every purchase we make in life is an investment of some degree, in regards to
kickstarter or indiegogo, a backer/customer/investor (whatever you'd like to
call them), needs to weigh out risk/reward ratio, but also factor in the
site's history of people delivering on their product.

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jdechko
Kickstarter is a in a tough position. I think it offers a valuable service
(though it's certainly not unique). I'm sure that most people looking to get
funded won't simply take the money & run as was done in this instance.
Unfortunately, Kickstarter is the only one still hanging around, so they're
left holding the bag, so to speak.

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UVB-76
In the beginning, I thought these kind of incidents would be the end of the
service.

A lot of the people using Kickstarter to raise capital for their projects
appear out of their depth, if not in the first instance, certainly when their
project takes off and they end up raising many times what they anticipated.

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run4yourlives
I'm actually surprised it took this long for someone to "take the money and
run".

It seemed like one of the major issues with kickstarter, and I'm surprised
they don't seem to have given it much thought.

~~~
makomk
It didn't. Off-hand, HanFree and Lockpicks by Open Locksport are both
confirmed to have taken the money and run by the project creator, and ZionEyez
and a whole bunch of others have simply gone silent.

~~~
kalleboo
The Open Locksport guy had a mental breakdown and the project has been taken
over by new management and it seems like they're making (slow) progress now.

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mvkel
Kickstarter users should demand that Kickstarter realign their incentives for
project success.

As it stands now, Kickstarter has zero incentive to ensure a project succeeds;
they make money on funding transactions and that's it. "Who cares if the
project is vapor? We got our money."

They could easily make an additional revenue stream out of it. Instead of just
taking X% of each transaction, they can add an additional "delivered project"
fee in exchange for more exposure on the homepage, social media channels, etc.

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famousactress
I think the tricky situation here is one of positioning. Of course Kickstarter
wants something as close to what a payments platform might get in terms of
accountability for the transaction, but they're providing a curated
marketplace for these projects. Closer to eBay or AirBnB... both of which have
ended up with really similar challenges to tackle.

At the very least it seems like it shouldn't be that challenging for them to
at least be prepared to aggressively deal with flat-out fraud.

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enemtin
This seems insane that Kickstarter doesn't have a policy on this. Guess all
investments have some level of 'risk' to them.

~~~
maxerickson
As far as I can tell, they basically want backers to be comfortable with 100%
risk. I think this is a reasonable position.

~~~
k-mcgrady
If it's unreasonable people shouldn't back projects. The creator is also
taking risk investing time and usually their own money into the project. If it
fails they lose that investment and the backers lose their investment.
Kickstarter needs to make it more clear to backers the risk involved and that
they aren't pre-ordering anything. They are giving someone money and hoping
they can successfully create something with it.

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maerF0x0
Same thing happened to me with Window Farms, backed for $1k and they "cant
afford shipping to canada" ... At this point I dont care though, at least they
made the product and got it into the hands of the US backers.

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jedahan
It looks like they have posted an update on March 6, 2 months ago. Not very
responsive but not as bad as the 3 years people think its been.

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belorn
Do kickstarter do any identification process when new projects are created?

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AlexDanger
Does anyone keep a list of Kickstarter projects that went sour?

