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The Almighty Buck

Peachy Printer Funds Embezzled To Build New Home Instead of $100 3D Printer (hackaday.com) 139

Reader szczys writes (edited): Peachy Printer made it big on Kickstarter, raising over half a million dollars on the promise to build the first 3D printer and scanner costing $100. The company has now collapsed due to embezzlement (Editor's note: BBC's coverage is better) of those funds. The original investor stole around $350,000 of backer's money and funneled it into a new home. This was discovered about 18 months ago but became public only now as the company is unable to meet their already delayed delivery dates. Peachy Printer has posted a video admitting the screw-up. Sounds familiar?
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Peachy Printer Funds Embezzled To Build New Home Instead of $100 3D Printer

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  • Is there any precedent for legal action against someone for doing this? Or can I just make a kickstarter, never fulfill it at all, buy a new car and there's no consequences?
    • by Anonymous Coward

      In theory, the Peachy CEO has started said legal proceedings against the guy who screwed him.

      Of course, he should have done it 18 months ago when it first started, instead of letting the guy promise to pay him back (and partially doing so).

      Whether a kickstarter contributor has any legal recourse depends on how much of an attorney they're willing to hire to get their $100 back-- and that's the one good thing about crowd-funding-- it spreads the risk, reducing the potential harm to an investor to small(ish) a

      • Re: (Score:3, Funny)

        by Anonymous Coward

        Whether a kickstarter contributor has any legal recourse depends on how much of an attorney they're willing to hire to get their $100 back

        Well, see, what you do is, start a kickstarter so all the victimized backers can chip in to hire an attorney......

      • Re:Legal Recourse? (Score:4, Insightful)

        by sbaker ( 47485 ) on Wednesday May 11, 2016 @04:54PM (#52093897) Homepage

        So...force him to give the money back - right? The problem is...the money isn't sitting in an account someplace. The guy spent it on building a house.

        So take possession of the house and sell it...or allow the guy to take out a mortgage and pay the money back that way? The problem is that - the house is only half-built...it's worth practically nothing in it's present state...he needs a construction loan to finish it.

        So - the smart thing to do (seemingly, at the time, after talking to lawyers) was to let the guy finish building the house - then he can get a mortgage - then he'll pay the money back - and everyone walks away a little older and wiser, but otherwise unscathed. But - if you make this all public and get the cops involved - then he'll never get the loan (nobody lends money to admitted embezzlers) - so he can't finish building it and everyone loses.

        So - you draw up a legal agreement - that you get your money in stages as the construction loan comes in - and, just for safety's sake - you get the evildoer to confess on camera, so that if he doesn't pay up - you'll go to the cops. ...and since he didn't pay up - the cops are now involved.

        Admittedly, this may not have been the smartest course of action...but then letting even a close friend sit on $600,000 without putting it into a shared account...also not so smart.

        • by mysidia ( 191772 )

          But then letting even a close friend sit on $600,000 without putting it into a shared account...also not so smart.

          Correct.... one of the first things they should have done with the money is placed at least $599,000 of the $500k with an insured and bonded custodian/fiduciary. Required an agreed upon budget understood by all members of the project before allowing moneys to be spent.

          Documentation for all spending.

          And signatures by multiple people authorizing any significant or non-incidental expenditure

          • by rhazz ( 2853871 )
            If they had this level of corporate maturity they probably would not be on Kickstarter.
        • The guy has organs and there is a market for it. Maybe he does have a family. And they have organs too.

          Believe me, being able to put that thought into practice does motivate people to pay your money back! You rarely have to follow up your suggestion, which is never really pleasant. It involves such high costs that it barely gets your money back in. It serves to make a point, but it is more profitable to just motivate the guy.

        • by srw ( 38421 )
          Wait, have you actually READ the documentation? This sounds suspiciously like you actually know what actually happened.

          At least /. has been someone more civil than YT.
        • by KGIII ( 973947 )

          Very rarely does it work to do business with friends or family.

        • So - the smart thing to do (seemingly, at the time, after talking to lawyers) was to let the guy finish building the house - then he can get a mortgage - then he'll pay the money back - and everyone walks away a little older and wiser, but otherwise unscathed.

          Only if he was telling the truth about the house. What verification was done on this? What if his real goal was to stall until a statute of limitations kicks in?

        • ...a new kickstarter to put in the pool and sport court?
      • That's the part I don't really get when it comes to Kickstarter. I can see risky investments, allright, been there, done that. But the return is so insignificant that I can barely say that I'm impressed by and of the offers.

        When I put money into a high risk venture, I expect equity. Not being the first to have whatever trinket you may produce and for only twice the street price.

        • When I put money into a high risk venture, I expect equity. Not being the first to have whatever trinket you may produce and for only twice the street price.

          Blame the laws that restrict risky investments to only the rich.

        • I see Kickstarter and Indiegogo as being really good places to pay something for a product that might have a chance to be manufactured in a small quantity but apart from that would never have any chance of being manufactured at all because the demand is way too low.

          The only other option is to design it yourself and pay 100 times that amount to have someone else manufacture ONE of said product just for you.

      • Anyone who backs a kickstarter project without the understanding there's a 33% chance you'll never see their money again, or receive the promised product, doesn't understand kickstarter, and probably shouldn't be allowed to have a checking account, let alone a credit card.

        I pledged $1 to PodRide [indiegogo.com] a few days ago, are you telling me that Mr. Kjellman could revoke my "many thanks"?

    • by srw ( 38421 )
      As part of lauching a kickstarter, you agree to use all the funds raised to produce the rewards promised to backers. So, potentially, the backers could probably sue if they can prove that the money wasn't all used for that.
      • by Mr D from 63 ( 3395377 ) on Wednesday May 11, 2016 @03:28PM (#52093271)
        Look on the bright side. At least this time something was actually built with the money.
        • Oh for the vote Karma, this would have gotten one of my Funny mod points!

        • Looking at my own kickstarter history (I contribute the amount to actually get the product, not $1 for a thank you):

          I have 8 contributions,
          1 failed (Clang) I could get a refund, they offered it, but I felt that there was actual effort to doing it, and it just didn't succeed.
          4 outstanding, the projects are still supposably attempting to deliver, I have heard nothing about issues.
          3 received.

          So, for me, the numbers are pretty good, I have no complaints. The 4 outstanding projects, from the updates being given

      • by Mitreya ( 579078 )

        Most "Kickstarter" Projects Just Useless Crap

        I think you are missing the difference between

        A. Useless project (backers know what they are buying)
        B. Failed project (people tried and backers knew there is a risk)
        C. Embezzlement (no one actually tried to do the project)

        • by srw ( 38421 )
          D) All of the above

          The PP prints great D&D miniatures and chess sets, but I wouldn't use it for dimensionally accurate parts.

          Some of us really tried, and actually made it work.

          Others ensured the failure of the project by leaving us without cash to ship.
          • by KGIII ( 973947 )

            > leaving us without

            Wait, you helped do this to people? I may have missed it but you should probably make that clear to folks that you're one of them.

            • by srw ( 38421 )
              I helped do _what_ to people?

              I helped build a 3D printer that could be sold at a profit for $100. We succeeded. Then we were all surprised when there was no money left to produce them.

              I'm not sure how I should make it more clear that I'm "one of them." I haven't exactly hidden that fact. I've mentioned it in many of my comments. That said, I was only a contractor, and haven't done any work on the project since January 2015. If it makes you feel any better, I'm pretty sure I'm still owed more money
              • by KGIII ( 973947 )

                Yeah - I didn't get to those comments - they're threaded later. In fact, see another one of my replies to you. ;-)

    • by EvilSS ( 557649 )
      Depends on the local law enforcement. If you can get them interested and they think they can prove fraud then yea, they can be punished. I think this has happened once or twice already. In all honesty though it's hard to do. In this particular case, it's possible
    • The SEC is watching from a distance, as raising money from investors is their bailiwick. Regulations may or may not be forthcoming.
      • The Financial and Consumer Affairs Authority and other provinces' equivalents are probably also paying some attention to this.

    • I don't know Canadian law, but in some Western countries, embezzlement of this sort would be considered a crime. So, even if there is no recourse for contributors, if the guy goes to jail it may deter other Canadians from pulling a stunt like this.

      As for investors, no, there probably isn't any legal recourse. However, the others running the project probably have grounds to sue him for the actual funds plus a separate action for taking actions that he knew, or should have known, would hurt the reputation o

  • I'm shocked! Shocked that anyone on Kickstarter would steal people's money to build a house when they could steal people's money to build a company. Remember the advice of the great philosophers Mr. T and Nelson.
  • by Anonymous Coward

    Why not sell the house and make it right?

    • Because the dick lawyered up and apparently wants to fight this.

      Defense probably sounds something like "I didn't do nuthin', nobody saw nuthin', nobody can prove nuthin'!"

    • The article implies that this was his exit plan when the missing funds were discovered, but the money he "borrowed" from the project wasn't enough to finish the house. So now he has a half-built house that he can't sell to get the money back.

  • Difference? (Score:5, Informative)

    by srw ( 38421 ) on Wednesday May 11, 2016 @03:23PM (#52093221) Homepage
    Well, a significant difference between this situation and the iFind is that the Peachy Printer actually works. It even works well, compared to the $800+ solidoodle at our hackerspace. It was working well enough to clean up the design and start shipping kits back in January 2015. Sadly, that also coincided with discovering the money reserved for actually making the printers was held up as collateral for David's house. (which turned out to not be the truth anyway) David kept stringing us along for a while, while Rylan explored other ways to raise some money to ship. And, if you've watched the videos and read the website you know the rest.
    • Good luck with that. You should have went to the Police the MINUTE you discovered the funds were misappropriated. Do you know why? He's strung you along for nearly 5 years and I would be willing to bet the statue of limitations on a criminal prosecution is well past. Most statues of limitation expire after 3 years in cases like this.

      He likely knew this and that's why he strung you along making some payments. You will never recover the funds and the police won't prosecute him.

      • by srw ( 38421 )
        Considering the kickstarter was less than three years ago and the missing money became apparent less than two years ago, "strung you along for nearly 5 years" might be an exaggeration.

        But, sure, in hindsight, Rylan should have gone to the police earlier.

        And, to be clear, I no longer have anything directly to do with PP. I was a contractor up until around Jan 2015. Now I'm just a friend and interested spectator.
        • Doesn't matter when it was discovered, it matters when it was done and when police bring it to trial. That's the time frame and from the timeframe you list it's going to be tough for the police to get him charged and before a judge before the statute of limitation is up. You might at best be able to extend the statute timeframe based on a last payment date but that would be a tough sell under most laws.

          • Re: (Score:2, Informative)

            by Anonymous Coward

            Well, I guess it's a good thing this happened in Canada where there is no statute of limitations on indictable offenses.
            Do you often talk out of your ass while trying to sound smart?

          • by eWarz ( 610883 )
            You should stop posting as you have no idea what you are talking about. The statute of limitations for most states is based on either a) the police report filing date. (i.e. if the crime happened 4 years ago, you reported it, but it didn't go to court until year 8, the time elapsed is considered to be 4 years, not 8) or for civil matters, the date the action happened and the lawsuit was filed. The court case could take 20 years to start, but wouldn't violate the SOL.
      • by eWarz ( 610883 )
        False. The statue of limitations in most states is 6 years. The kickstarter campaign is less than 3 years old.
  • Don't worry (Score:5, Funny)

    by DrXym ( 126579 ) on Wednesday May 11, 2016 @03:23PM (#52093229)
    Peachy printer backers, don't fret. I'll be launching a Kickstarter soon for a printer which can print an entire house. Back me for $100 and I'll post an approximate sketch of the house. Back me for $500 and I'll send you photocopies of the plans. Back me for $1000 (top tier Rube Level) and I'll send you a postcard from the country it's located in. Act now!
    • by srw ( 38421 ) on Wednesday May 11, 2016 @03:41PM (#52093365) Homepage
      Sweet... My next kickstarter was going to be for a fleet of autonomous drones with eyedroppers and UV lights underneath that could 3d print anything. Maybe we can work together.
    • by sbaker ( 47485 )

      That's not fair. The Peachy printer does actually work. I confess that I didn't THINK it would work - so I pledged $1 so I could watch what happened...and I was pleasantly surprised that they engineered the shit out of it - and it works just great.

      • by srw ( 38421 )
        It works surprisingly well. It's too bad not many people will ever believe that.
  • Of fraud and embezzlement, which I'm pretty sure is covered by existing criminal codes.
    I guess the next question is which jurisdiction is going to charge them?

    • Depends on the state. If I recall, your primary residence (home) can't be seized regardless of how it was paid for. I've heard all sorts of VC scams in which the fund directly went into the building of a house. It's a one-trick pony scam. Your reputation is screwed, but for some people, it's ok, they only have 30+ years of their life or less with retirement.

      Correct if I'm wrong, please.

      • by srw ( 38421 )
        It's true that in Canada it is exceedingly difficult to seize a person's home. So, even if PP successfully sued David, the chances of getting the money before $99 teleporters are common would be slim to none.
        • it is exceedingly difficult to seize a person's home

          As it should be...

          Now David might be a slime ball, but you don't want a situation where it is really easy to take someone's home.

          A man's home is his castle, everyone needs a place to live, regardless of any other considerations.

          The real fault lies in the money going into David's personal checking account, that shouldn't have been allowed to happen. Dollar amounts of this size should be in a business account with controls on how much can be taken out without 2 signatures.

          • A man's home is his castle, everyone needs a place to live, regardless of any other considerations.

            So he can go live in the penitentiary. When your home is paid for with embezzled funds, it never belonged to you. Untold millions (billions?) of people in this world don't own their own home, if for no other reason than they aren't thieving dickbags. Why should this guy get to keep that big ass house that he essentially stole? There are far greater people who spend their nights sleeping on the streets.

            • I'm not suggesting that he should keep it, I'm suggesting that it shouldn't be EASY to take it...

              Are there cases where you should be able to? Yes. This might well be one of them.

              But it shouldn't be EASY to do... he should have his day in court, just like everyone else... The default position should be he keeps it, unless a court finds that it was paid for with stolen funds.

              In other words, the state must prove in court that he is guilty, he should be assumed innocent.

        • It's true that in Canada it is exceedingly difficult to seize a person's home

          David claimed that he could not get the cash from the loans because the state of the house did not meet certain requirements. Hence, it's not his home: it's just a partially built house that he owns.

          Of course, he may well be lying about the state of the house and his ability to draw cash from the loans.

        • by KGIII ( 973947 )

          LOL How true - I'm Canadian by heritage and hold dual citizenship. By the way - you cleared up what I was confused about in one of your other posts. The "us" was a bit odd but now I see you were just a contractor. Well, I hope you've got popcorn.

      • It's not just your reputation, it's also CRIMINAL. Even if they can't make you sell your house, they can still make you go to prison.

        So, yes, you are wrong in that it is not a legal way to steal money and still get to benefit from it. You are correct that, like most crimes, it is exceedingly difficult to make the criminal pay back what they stole.

        But it is no different than if you embezzled 1 million from a bank, stole it at gun point from a jeweler, or electronically via Kickstarter.

      • by eWarz ( 610883 )
        Have to pipe in here. That's false. You can lose your house over pretty much anything. Including that bullshit doctor bill for $50 you refused to pay for 5 years ago. All it takes is a default judgement, and then they can foreclose if you refuse to pay up. They get a lien on the house and go to town.
    • Someone who has read Kickstarter's terms more recently will need to chime in. But I was under the impression that as a contributor, you are basically just donating your money for nothing more than a promise. When I read through the EULA long ago, I seem to recall something about acknowledging the project may fail and I may see nothing in return for my money.

      That's one of the things I don't like about the current crop of crowd-funding sites. They're slanted very much in favor of the recipient and again
      • Mostly because you have to have huge sums of cash to fund a VC in the US. VC investors tend to also bring resources and connections to the table.

        Now let's look at it from a different perspective it it was his full time job for a significant amount of time 350k salary does not seem excessive.

  • by NotDrWho ( 3543773 ) on Wednesday May 11, 2016 @03:25PM (#52093249)

    Most Kickstarters don't even produce a house.

    • You wouldn't download a house.
      • I would if it had a nice sunroom.

        • by KGIII ( 973947 )

          Shit yeah. I'd download a car too. Hell, I'd download ALL of them.

          I never understood that bit about how I wouldn't download a car. Yeah I would. I spend more on automobiles than I spend on almost anything else. If I could download even the parts for a car, I'd do that.

  • I thought at the time and still do in many ways that this product was to good to be true. I had some hope that this would turn out good, but I am a pragmatist when it comes to revolutionary products that go on crowed founding sites, excely at the price point they choose. When you compare it to other SLA based printers and their cost. Even the SeeMeCNC SLA printer kit was around $400 and you still needed to provide a DLP projector. As they say buyer beware. Always take what you see as a grain of salt and do
  • One of the things that stuck in my mind about the video (aside from the cheesy feel sorry for me video editing) was that he said they didn't have a corporate account for the funds to arrive in, so they chose his personal account?

    I live in a 3rd world country (South Africa), and it takes me 1 minute to set up a new bank account with shared access credentials with my existing bank. This means the account is completely separate from all other of my accounts, and I can create as many logins as I want for it wit

  • by shanen ( 462549 ) on Wednesday May 11, 2016 @04:25PM (#52093681) Homepage Journal

    Love the idea of Kickstarter because most people are nice and want to do nice, but... The lack of accountability is a FATAL flaw in the implementation.

    So here's a constructive suggestion for a solution I call the "charity share brokerage":

    The brokerage will earn a commission on the funded projects based on providing IMPORTANT supporting services for proposal preparation and evaluation of the results. In particular, the brokerage will make sure that EACH proposal has:

    1. A realistic schedule
    2. An adequate budget
    3. The critical resources (including the people) and all of them are available
    4. No gaps (such as insufficient testing for a software-related project)
    5. SUCCESS CRITERIA

    The projects should NOT be over-pledged, which is the critical flaw in Kickstarter's business model (and the other such websites I've studied). They allow over-pledging because they take a flat percentage and more money in the project is more money for them. Instead, when the project is funded, that's it. They earn their percentage for "meta-expertise" in preparing project proposals and evaluating project results.

    After the project has been completed, the brokerage applies the success criteria and reports the results to all of the donors and to any websites that were linked to supporting the project proposal.

    My new motto is "More detailed suggestions available upon polite request, but I'm not holding my breath." After all, everything is intuitively obvious to the most casual observer.

    • I don't understand why KS campaigns shouldn't be over-pledged. The ones I've participated in have been basically advance sales, with the money gathered used to design and produce the whatever, and I don't see why more backers can't be accommodated. Some of them also have "stretch goals", so that if they can get $X over the funding amount they can provide better art, or other one-time expenses.

      As you describe the brokerage, its main function would be to report on whether the KS campaign worked or not.

      • by shanen ( 462549 )

        Let me try to reword it as Adam Smith's contemporary David Ricardo might put it. Ricardo basically proved mathematically that specialization is a good thing. If you're an expert at making widgets while I'm an expert at making woojits, we're both better off if each of us stays focused on our specialties and exchange our surpluses. We both wind up with more widgets and woojits than if we wasted some of our time working as amateurs.

        As it applies in the specific example here, there is a specialty of making a pr

        • I don't see anything here about how much funding a Kickstarter should get.

          In this case, a supervisory agency would have checked and found that the resources were OK, the design was OK, and likely the preparations for production were OK. What they would not have found was that somebody was going to embezzle the money, and that's a danger in any endeavor that handles enough money. It could have looked at the business arrangements, found them wanting, and asked them to set up something better (where it wo

          • by shanen ( 462549 )

            Actually, there are three ways that the 'charity share brokerage' I am suggesting would be more resistant to this kind of fraud.

            (1) They would accumulate experience from evaluating past projects, so they would be able to learn for warning signs that something is suspicious based on comparing the patterns of projects that had had similar problems. As it stands now, Kickstarter simply disclaims any interest in results.

            (2) The brokerage would have a vested interest in actively pursuing such criminals (and woul

  • Holly shit they even look like total douche-bags.
  • When you invest in something, you take a risk of whether you'll get it.

    I bought an Ergodox EZ and luckily it turned out well -- very well. But it was a risk.

  • This statement... (Score:5, Insightful)

    by rickb928 ( 945187 ) on Wednesday May 11, 2016 @05:06PM (#52093979) Homepage Journal

    "He worked in Northern Alberta as a heavy duty mechanic"

    When I read this, I nearly stopped reading further, but curiosity conquered me.

    Sorry, but the qualifications floor me.

    "David hired an Accounting and Financial Consulting firm to assist in the management of Peachy Printer's finances."

    Yup, surely THEY did a great job. Recourse here? I'm betting they did nothing but dip their beaks.

    "Due to the fact that the Kickstarter campaign was over before Peachy Printer existed as a corporation, we did not have a corporate bank account set up to receive the funds. As a result, David’s personal account was set up to receive the funds."

    Oh, here is where it went bad. I would have left it at Kickstarter until the corporate account was ready.

    From here on, it's faith in others, failed human beings, and predictable outcomes.

    • by maugle ( 1369813 )
      "David hired an Accounting and Financial Consulting firm to assist in the management of Peachy Printer's finances."
      And I'll bet that David just so happens to be the sole employee of said consulting firm.
  • by sbaker ( 47485 ) on Wednesday May 11, 2016 @05:10PM (#52094017) Homepage

    I think they need a rule that first-time project owners are only allowed to collect up to 200% of their "goal" amount. Once the project hits that number, the "PLEDGE NOW" button goes away.

    That limits the amount of damage that a first-time project owner can do. It doesn't prevent them getting the money they need to get the business started - plus a healthy "win" for doing a great job. But it would prevent viral projects from dumping so much money into someone's lap that they become intimidated by the magnitude of the task and find it easier to take the money and run than to complete the project.

    Once someone has proved themselves and delivered as promised, they can try again without the cap.

    Having run 5 successful Kickstarters myself, most of them 400% or more over goal - I understand how daunting it can be. When the project is running, a kind of "red mist" descends and pushing the total higher and higher becomes highly compelling. When the countdown expires and you suddenly realize that you're tens of thousands of dollars better off - it's exhilarating. But the next morning, when you start to realize the magnitude of what you've just signed up to do...it can be very daunting.

    It's also very difficult to plan a project when you don't know whether you'll sell 100 widgets or 100,000 widgets. When you go from "Oh - I can just 3D print that component at home - and solder that switch to the circuit board myself!" to "I've got to get a $10,000 mold made by a company in China and I have to fly out there to make sure it's OK - then find a factory that can solder that switch on for me."...suddenly things get much more serious.

    It's exceedingly difficult to design, price and schedule production on a product where you have literally ZERO idea how many you'll sell.

    So for that first project - make it so I'll know that I'm selling between 100 and 200 widgets.

    • I backed a set of playing cards on Kickstarter called Asylum playing cards.
      https://www.kickstarter.com/pr... [kickstarter.com]
      Unfortunately, the project owner, Ed Nash, disappeared with the money and failed to deliver the cards.

      After some amount of drama, it turned out his artist had long finished the art for the cards, and nothing should be holding them up. All Nash needed to do was pay USPCC to print them up. Instead of doing that, he stopped tending the Kickstarter, sporadically promising the cards before ultimate
    • Your idea is good, but personally I don't think it goes far enough for first timers.

      If you're making something small, scaling isn't terribly difficult, if you are making something complex, such as a 3d printer, scaling becomes tricky. The more parts you have the trickier the logistics, some suppliers may not scale as easily, China becomes a minefield, and your timeline may be significantly stretched.

      This was exactly what happened to us.
      When we told a supplier we needed 180% instead of the 100% we ex
  • A "screwup" is when you try hard, but something doesn't work and you can't deliver. What we see here is a deliberate embezzlement, which should be a crime, and for which the perp should compensate the backers (by e.g. being forced to sell the house he built with this money).

  • but even I know that you don't mix personal and business funds. The CEO is a dope for ever allowing it to happen.

  • ... only 50% of the revenue was stolen, and his biggest problems are still:
    - late delivery
    - slow development
    - unable to certify/ship the laser

    So, yeah, the other incompetent 'financial guy', seems like an easy to blame scapegoat to me.
    Lot's of blabla, but I've been waiting all these years on false promises during all the updates...
  • "How to build a home with a 3D printer."

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