The Federal Trade Commission (FTC) imposed a permanent ban on iBackPack of Texas and its owner Douglas Monahan from engaging in crowdfunding activities.

Crowdfunding is the practice of raising or soliciting money through the internet from people to fund a project.

In May 2019, the FTC sued iBackPack of Texas and Monahan for allegedly operating a crowdfunding scheme that raised more than $800,000 from consumers. The defendants allegedly told consumers that they will use the money to develop, produce, complete and deliver products such as a backpack equipped with technology features such as batteries for charging laptops and phones, cables, and a Bluetooth speaker

FTC accused defendants of deceiving consumers

However, the defendants allegedly continued raising money from consumers while using a large portion of the fund on various personal expenses. Hundreds of consumers complained about the project and requested refunds, but Monahan ignored them, shut down his company, and transferred the remaining funds to unrelated companies he controls.

Monahan’s conduct is a violation of Section 5(a) of the FTC Act, which prohibits “unfair and deceptive acts or practices in or affecting commerce.”

According to the FTC, the permanent ban from crowdfunding is part of a settlement with iBackPack of Texas and Monahan in connection with its complaint against them.

Additionally, the Commission prohibited Monahan from misrepresenting his ability to deliver any product, service, or the term on which he will provide a refund.

Furthermore, the FTC imposed a judgment of nearly $800,000 against Monahan, which will be suspended due to his inability to pay. The full amount will be due once he is found to have misrepresented his finances.

In a statement, FTC Bureau of Consumer Protection Director Andrew Smith said, “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. When companies like iBackPack misuse the money they raise, that’s when the FTC steps in.”