In yet another unfortunate reminder that crowdfunding campaigns can, and very often do, collapse under their own weight, the startup company responsible for the hugely successful Zano drone Kickstarter campaign has gone bankrupt.
The Zano became the most funded Kickstarter campaign ever in Europe, raising £2.3 million ($3.4 million) for British startups Torquing Group. However, after initially stating that they would be shipping the drones to backers in July 2015, it has now been revealed by the company that this won’t be the case and in actuality they’ve gone into liquidation, leaving the vast majority of their financial supporters left completely empty-handed.
Only 600 of over 12,000 drones that were supposed to be sent out to backers have made their way to the project’s investors, and as outlined Kickstarter’s terms of service, if Zano do not find a way to make good on the rewards they outlined to their backers, they could face legal action. While Kickstarter absolves itself of any responsibility when a project such as this fails (they state that they adopt the position of a middle man, allowing creators to bring a project to life though also not facing any legal liability if these projects are ultimately not fulfilled), the agreement that campaign creators enter into when they set up a project using the site outlines how not fulfilling their promises leaves them open to lawsuits from their investors. Whether any backer will decide to pursue a lawsuit with the company remains to be seen, but this is the only way backers could potentially receive refunds in the future.
A backers-only statement released by Torquing Group today reads: “Having explored all options known to us, and after seeking professional advice, we have made the difficult decision to pursue a creditors’ voluntary liquidation,” the message states.
“We are greatly disappointed with the outcome of the Zano project, and we would like to take this opportunity to thank everyone who has supported us during this difficult period, especially our loyal employees, whose commitment has exceeded all expectations.”
The announcement follows the revelation that CEO Ivan Reedman had left the company, citing “personal health issues and irreconcilable differences” as the reasoning behind his departure. Following this announcement, backers set up a Change.org petition demanding that they receive refunds, claiming that many who had received the drones had reported them as either “uncontrollable” or stating that they “do not fly at all.”
Unfortunately for backers, a Change.org petition has no legal binding, so pursuing this route with a company that has gone into liquidation is unlikely to see them receive their money back from Torquing Group. The only way for them to get their money back is for a lawsuit to be filed against Torquing Group, though such legal action has rarely been faced by failed Kickstarter projects, with the first consumer protection lawsuit involving a crowdfunding campaign having been filed in 2014, and the Federal Trade Commission having taken action against a Kickstarter project for the first time ever in June 2015.
An update to Kickstarter’s terms of service, which specified that creators would face legal action if they do not fulfill their outlined backer rewards, was issued by the site in September 2014, but it still remains slim pickings in regards to the amount of times a company has been ordered to pay up after their planned project has collapsed. Hopefully Torquing Group will be forced to make good on their refunds, and those who invested their money into the campaign will have it returned to them at some point in the not-too-distant future.
