Federal Trade Commission Sues Smart Backpack Crowdfunder


The Federal Trade Commission (FTC) is suing a startup that guaranteed its crowdfunding backers a smart backpack but squandered its funds on bitcoin and credit card bills instead.

According to the complaint, Douglas Monahan and his firm iBackPack of Texas, LLC secured $800,000 from clients to create several products including a smart backpack that has built-in batteries to enable charging of laptops and phones.

The FTC argued that Monahan purportedly spent the money on “personal purposes” instead of supplying the iBackpack. The FTC then asserted that Monahan threatened those who complain online:

“Despite Defendants’ repeated assurances, Defendants have not used contributions to produce and distribute completed products. Instead, Defendants have used a large share of contributions for Defendant Monahan’s own personal purposes, such as making bitcoin purchases and ATM withdrawals and paying off personal credit cards; for marketing efforts to raise additional funds from consumers; and for other business ventures.

Hundreds of consumers have complained about Defendants’ failure to produce the products. Some consumers have also complained that Defendant Monahan sent threats to try to silence their criticism, including by telling one consumer that he knew where the consumer lived and had other personal information about the consumer, and by threatening to sue another consumer and his employer for libel and slander.”

The Director of the FTC’s Bureau of Consumer Protection, Andrew Smith, said, “If you raise money by crowdfunding, you don’t have to guarantee that your idea will work,” adding that, “But you do have to use the money to work on your idea — or expect to hear from the FTC.”

The FTC is requesting Monahan “for permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies.” It looks like he needs to cash in his BTC.