FTC Settles First Crowdfunding Fraud Case

Erik Chevalier raised over $100,000 on Kickstarter to fund a board game but allegedly used the money for personal expenses.
3:10 | 06/13/15

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Transcript for FTC Settles First Crowdfunding Fraud Case
All right, we are back now with "Gma" investigates. This morning, crowd funding. Kick starter and popular site for raising money for all kinds of dream projects. Authorities say one self-styled entrepreneur spent most of his money not on his project but on himself. Jim Avila has the story. Reporter: It's the new and trendy way to finance your business when the bank will not. You have seen the success stories, from the world's best water bought toll a soft t-shirt. And $1.7 million for Boston bombing victims. But officials tell us not all of the investments have a happy ending. You have to wonder what happened to all the extra money. Reporter: Andrew is one of 1200 people who donated to this kick starter campaign. Asking for $35,000 to make and distribute a board game with a dramatic design and computer game pieces. Sort of monopoly meets game of thrones. It surpassed its goal raising $122,000. After three years, still no game. The promoter, Erik chivalale saying the project is canceled. And reports this week say it's worse than that. Saying he participated in deceptive acts and ran a fraudulent crowd funding campaign. He did not even spend the money he collected on the venture. Reporter: Accused of spending the funds on rent for an expensive home. Kick starter user want to know where the money went. And "Gma" investigators want to know where the money went. Jim Avila ABC news. You are not going to shake my hands. I worked on the project, I tried to get it made. It didn't work out. Reporter: You didn't spend the money on other things? No, I put it in the project. Reporter: You dispute he put most of the money on the game. We would. Reporter: Not admitting or denigh guilt but promising to never mislead investors in the future. The first legal action against a crowd funder is a warning this popular investment platform has risk. And if someone takes the money and runs, it's up to the investor to do the chasing. For "Good morning America," Jim Avila, New Hampshire. If you're an investor and you give your money to a lot of sites, you have to have blind trust. You don't have a legal -- And I saw $55,000 to make potato salad on a kick starter. So -- I have a bunch of ideas on the commercial break. Look for those in a little

This transcript has been automatically generated and may not be 100% accurate.

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