Pallone Examines How Federal Agency Protects Consumers from Fraudulent Crowdfunding Platforms

Crowdfunding Scams Occurred In Aftermath of Hurricane Sandy

WASHINGTON, D.C. – Congressman Frank Pallone, Jr. (NJ-06), the Ranking Member on the House Energy and Commerce Committee, is examining the Federal Trade Commission’s (FTC) role in protecting consumers from fraudulent campaigns on crowdfunding platforms.  Today, in a letter to FTC Acting Chairman Maureen K. Ohlhausen, Pallone and five other committee leaders voiced concern over the FTC’s policy for ensuring that these platforms are not used to deceptively or fraudulently solicit charitable contributions.

Crowdfunding allows individuals and businesses to fund projects or ventures by raising funds from a variety of people, commonly through online platforms. 

“Following a natural disaster, people want to help those around them who are suffering, but unfortunately it’s also an opportunity for scammers to take advantage of people’s goodwill,” Pallone said.  “We saw that first hand after Sandy, and it’s only getting worse as Crowdfunding expands.  We must examine whether the FTC can do more to protect consumers from deceptive and fraudulent practices so that people can be confident that when they use these platforms the money is going to help those in need.”

Crowdfunding scams occurred in the aftermath of Sandy, which was the first major U.S. natural disaster to occur in the age of social media.

“Before Hurricane Sandy even reached the United States, over 1,000 websites were created to support victims of the storm, including many questionable campaigns attempting to solicit donations while providing virtually no information about who was organizing the campaign or how the money would be spent,” Pallone and committee leaders wrote. 

For example, an investigation found that less than one percent of the $600,000 raised by the Hurricane Sandy Relief Foundation went to victims. 

“The Committee seeks information about the FTC’s actions and policies for ensuring that crowdfunding platforms are not being used to fraudulently or deceptively solicit charitable contributions,” Pallone and committee leaders continued in their letter.

Pallone was joined on the letter by other Committee leaders, including Representatives Greg Walden (R-OR), Chairman of the House Energy and Commerce Committee, Tim Murphy (R-PA),  Diana DeGette (D-CO), Bob Latta (R-OH) and Jan Schakowsky (D-IL).