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Laxalt warns of crowdfunding risks

Nevada Attorney General Adam Paul Laxalt is encouraging consumers to be diligent before contributing any money to projects or causes featured on crowdfunding websites such as Kickstarter, GoFundMe and Indiegogo.

Crowdfunding websites raising money from a large number of people to fund projects. Consumers using these sites risk falling victim to charity scams or suffering financial losses from failed projects.

“Crowdfunding provides opportunities for consumers to support charitable causes or become actively involved in bringing new products to the market,” Laxalt said in a statement. “It is, however, important for Nevadans to make informed decisions before contributing their money to avoid suffering possible losses from failed projects and phony causes.”

Most popular crowdfunding platforms are donation-based or rewards-based.

Both involve different risks that consumers should understand before they contribute money.

Consumers using donation-based crowdfunding, such as GoFundMe, are vulnerable to fraudulent charity scams soliciting money for phony causes.

To ensure your contributions benefit the causes and individuals you would like to assist, would-be donors are encouraged to do preliminary research and to donate only to familiar and trusted users.

If you have information about a fraudulent crowdfunding campaign or suspect you have fallen victim to a crowdfunding scam, you can file a complaint at http://ag.nv.gov/Complaints/File_Complaint.

Also, Lexalt suggests, review the crowdfunding site and become familiar with the criteria used to certify or verify a donation campaign. Be wary of donating to any campaigns that have not been certified or verified according to the platform’s standards.

Use only the platform’s designated payment options when submitting donations. Avoid using links that lead to alternate payment methods and meeting with individuals trying to arrange alternate payments.

When in doubt, avoid donating, he said.

Consumers using rewards-based crowdfunding, such as Kickstarter or Indiegogo, are vulnerable to financial risks if projects fail or are exposed as fraudulent. Consumers backing these projects often expect to receive rewards such as a free or discounted copy of the product from the project’s creator in return for their financial support. However, if a project creator encounters creative, administrative or financial problems that prevent production, backers may receive nothing.

Consumers can minimize this risk with research. Determine whether the creator has completed other crowdfunded projects, and whether he has been mentioned in any community forum “rip-off” complaints.

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