In such a case, Nick Evans would be personally liable for damages.
If the bar for fraud was set that low, I bet half of failed startups would be considered "fraudulent." More than half if you look at restaurants.
> Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage.
Unless you have some damning email or other disclosure you'd never be able to prove that they knowingly sold scooters they never intended to fulfil, therefore fraud is out. In fact all the evidence seems to indicate the opposite, that their long term goal was to make this a successful business and grow until the money ran out.
If at this point they had not made an effort to reach this goal (placing an order with the manufacturer for example), that is a misrepresentation of fact.
Fraud doesn’t imply malice. They could have jumped the gun on announcing they were preparing to deliver, but doing so would still constitute fraud, especially if this drove an increase in orders.
Legally it does. The discussion was about using lawsuits to break Limited Liability. In that context malice is absolutely required to stand a shot at winning.
> They could have jumped the gun on announcing they were preparing to deliver, but doing so would still constitute fraud, especially if this drove an increase in orders.
There's a large problem with this argument, by the time that delivery "promise" had occurred the exchange of money had already happened. Fraud occurs when someone receives something, through deception, that they wouldn't have otherwise received. By the point of this claim the exchange had already taken place, and therefore the claim didn't indice anyone (i.e. they didn't gain additionally from it).
I think it boils down to people conflating "right and wrong" with "fraud." Nobody is saying this business was run well or they didn't do wrong by their consumers. What we're discussing is the legal definition of the term "fraud" and if a hypothetical lawsuit would be winnable.
You would have to prove that when the statements to prepare delivery for 12/15 were made, the company had absolute knowledge that no future funding was going to come and that it was guaranteed that they were lying.
If the company was in talks with other investors and thought it might be able to raise in order to ship what was necessary, that's not fraud. That's bad business and everyone should be weary/stay the hell away from any future venture from this place, but that isn't fraud.
It is fraudulent to take payment and not deliver product regardless of the intentions of the founders to be successful. Lacking mens rea, perhaps makes it a misdemeanor instead of felonious, but courts will push the founder all the way to bankruptcy and potentially to jail if they cannot repay damages.
Seems like other comments may not understand what constitutes fraud. I have experience with this situation and discussed it with my lawyer when my company eschewed kickstarter/indiegogo and opted for direct sales instead. We even used our rejection of crowdfunding for PR to boost sales (thanks techcrunch!). Our sales spike was such that PayPal held our money in reserves, which led me to take on all sorts of awful loans to pay for scaling production and made for a slow and painful fulfillment process.
