62 Pages Posted: 26 Aug 2016 Last revised: 16 Apr 2017
Date Written: August 24, 2016
Using Kickstarter and Indiegogo, the two largest crowdfunding platforms, we conduct an exhaustive search of all fraud cases from 2010 through 2015 that spans nine countries. In line with traditional economic theory, we posit that crowdfunding fraudsters are most concerned with getting caught and with the extent of the expected punishment. However, human nature suggests that maintaining a positive self-concept may be of equal concern. In line with this hypothesis, we present evidence that fraudsters are becoming more recognizable on portals and to the crowd because of several specific characteristics: They are less likely to carry out repeat funding campaigns, they are less likely to have a social media presence, and they are more likely to provide poorly worded and confusing campaign pitches with a greater number of enticements through pledge categories.
Keywords: Crowdfunding, Entrepreneurial Finance, Fraud, Internet
JEL Classification: G21, G24, G32, K22, L26
Suggested Citation: Suggested Citation
Cumming, Douglas J. and Hornuf, Lars and Karami, Moein and Schweizer, Denis, Disentangling Crowdfunding from Fraudfunding (August 24, 2016). Max Planck Institute for Innovation & Competition Research Paper No. 16-09. Available at SSRN: https://ssrn.com/abstract=2828919