Did you hear the one about the Peachy Printer? Guy asks for $100,000 to build a $100 3D printer. Raises over a million dollars between Kickstarter, Indiegogo, Backerkit, the Canadian government and his family for his dream. Partner secretly spends over $300,000 on a house. CEO covers up theft to apparently maintain face, recoup funds, continue development. Recovers $100,000 from thief who defaults repayment agreement. Spends the vast majority of the rest of the funds on salary. Goes broke. Blames theft. Releases taped “confession” from thief that he has been holding over his head for 18 months to extract payment. Thief said he was coerced to confess. Project dead in water. Inventor very bummed. Backers? (pissed). Canadian authorities notified 6 months ago but don’t know what to do with this new fangled crowdfunding thing.
Eric Greene, director of consumer protection with the province’s Financial and Consumer Affairs Authority, is working to determine what people thought they would get in return for their money.
“Was it a gift, a donation, an investment, a contribution or a purchase? Was the promise that you would get a product at the end of the day dependent on a variety of issues?”
There are a few big questions here. Is it legitimate to blame the loss of a portion of funds for the failure of the project? There was much more money spent on the salaries of the developers than was left ultimately outstanding to the embezzler. Only a portion of the funds are included in the peachyprinter.com mea culpa fancy graphics. How much was raised by Backerkit? Critically, how does Backerkit’s lack of user facing terms of service regarding such transactions as “pre-orders” affect the transacting parties? We know that funds given to Kickstarter and Indiegogo have basically no guarantee of returning any reward. What about Backerkit’s blurring of the lines with the concept of a pre-order? Is this any different than an order?
When I contacted Backerkit to tell them that I had been defrauded by Peachy, they replied that they were very very sorry, but
“due to the recent developments in the Peachy Printer project, we are unable to handle cancellation or refund requests at this time.”
I explained to them that I was under the impression that my transaction was framed as a pre-order, and asked them if they could clearly define this concept for me. Their answer?
“Unfortunately, BackerKit does not currently have a public-facing Terms Of Service for Pre-orders, and this debacle is definitely pushing that to the top of our to-do-list.”
I’ll bet it is.
Here is how Backerkit promotes the concept of pre-orders on their site:
Expand your fan base
A crowdfunding campaign is an exciting event, not a store. Kickstarter has been clear about their position on this, and we think it’s a good idea to retain the sanctity of that event, too. But offering preorders doesn’t actually reduce the value or excitement of this event—it’s just a way for you to allow more people to support your project.
But just to make sure to retain the sanctity of the original campaign, you can always create a little bit of differentiation between pre-order backers and your original backers. Most pre-order backers are excited just to have the option to get in on a campaign that they missed out on, so the easiest way to differentiate is usually to offer slightly different pricing options for pre-order rewards. Rarely have we heard of a campaign’s original backers actually being upset that the creator offered pre-orders after the official end-date. In the end, you’re just allowing more people to get on board and broadening the reach of your project.
Just down the same page, they say this:
Pre-orders also allow you to keep momentum going outside of Kickstarter and Indiegogo. With the added convenience brought by the new Kickstarter Spotlight feature, you can easily lead backers to your own site for pre-orders, whether it be via the BackerKit Pre-orders Widget or your personal online store.
So if Kickstarter is not a store, and Backerkit is differentiating itself from that “event,” what is a pre-order from a store if not just an early order? Where, pray tell, is the sanctity?
This case has serious implications for the crowdfunding community. The story broke two days ago and the thousands of backers are dying for answers. I, for my part, backed the project both because I wanted the product and because I thought the innovative cost-cutting design choices the inventor was working with deserved support. This was a scrappy project from the start and appear to have been simply unprepared for the amount of money that came its way. Clever inventor does not equal successful CEO. Apparently heavy equipment mechanic makes really bad CFO.
This is how embezzler David Boe introduced himself to the forum of Peachy Printer Beta testers back in April 2014:
In other words, backers are supposed to accept that they have been hung out to dry because our Fearless Inventor parked his car in this strangers driveway, then Kickstarter deposited $587,435.73 in his personal account. And the inventor was too absorbed tinkering to notice.
The internet seems to divide in three on the matter. There are those that see Rylan Grayston as the victim he claims to be, who only did what he had to do–who had no choice under the circumstance. There are those that think his cover-up hurts his credibility even if he was in a very tough spot. Then there are many who don’t believe a word he says (or for that matter the video-taped confession of the thief, David Boe).
I have been following this project closely ever since its inception at the end of 2016. I backed it at the Beta tester level both because of the promise to send me a Beta kit immediately and for the opportunity to become part of a community of people supporting the development of the product. The community never materialised, and the company was making revisions fast enough to make the kit obsolete almost as soon as I got it. I continued to follow updates over the following two years. Knowing now that the money was missing from the start makes me call into question whether or not the makers were truly making a good-faith effort to bring the product to backers. Only an investigation will clear this up.
As angry as I am i still believe Rylan Grayston–mostly. He strikes me as ernest, amateur, and truly heartbroken by this affair. But I can’t reconcile his blaming the Peachy failure on David Boe, his partner who stole the money. Nor can I get over the fact that I pre-ordered when they made that offer after the Kickstarter. The money had already been stolen. The company continued to raise money from the public and the government despite being aware of the internal fraud. That is the worst part. Unfortunately for Rylan, I’m afraid it also may put him in the position of answering criminal charges. It most certainly exposes him to severe legal liability. It damns his credibility. Nevertheless, I’m inclined to think that he did what he felt he had to, and maybe even was trying to limit damage to his remorseful former friend.
This does not make matters any better really. I can’t forgive the fact that I contributed when asked, after it should have been clear that the money was not where it should have been. This was a practice that continued throughout the life of the company, run low on cash–scramble for someone else to buy in. Bad news. Ever hear of a pyramid scheme? I first received this opportunity on Jan 08, 2014, and I made payment on 2/12/14. I’m not accusing Rylan Grayston of knowingly defrauding me–yet. The fact remains however that when I paid in $620, David Boe had already spent almost $320,000 on building a house. What was Rylan doing with his portion of the funds during this time?
The answer is he was spending almost $400,000 on salary and wages. Oops. No wonder Peachy decided to announce seven months later that the “Peachy Printer is Now Available for pre-order.” They sent this email on 10/15/14:
That was a year and a half ago folks. Peachy Printer was totally broke then. This was three weeks after Peachy hit rock bottom. Three weeks after the September 18th date that Rylan gives as the day he finally demanded the remainder of all corportate funds from David Boes personal account–and received only $30,000. This left $320,000 outstanding. That is why they said the printer is available and offered it for “pre-order.”
When I look back at the email that I got asking for money, three months after the theft, it does say that the terms of transaction are essentially those of the kickstarter. It’s not exactly legal language but the idea is that there is no obligation to deliver put upon Peachy. It is a risk. That email came from Kaleb Dunlop.
I can’t find much on Kaleb, but he seems to be some young kid that was working for the Peachy team. When I google him I get this link for a Google Plus page,
Strangely, clicking the link leads to the following page:
Is Kaleb Dunlop actually Nathan Grayston? What does this mean? It seemed suspicious, so naturally I googled to see if Superman and Clark Kent were ever seen together:
Dunlop is the big kid in this 2012 photo, holding the Skateboard. Nathan Grayston (Rylan’s brother and also a Peachy employee), is on the far right. Two totally innocent kids at a community skatepark groundbreaking. They look well intentioned. Why the link for Kaleb’s Google Plus page apparently leads to Nathan’s page is anybody’s guess. I’m sure the authorities will be talking to everybody who worked for Peachy. Rylan says when the fraud was discovered that he and his brother took massive paycuts and moved out of their commercial space into a shared home that they worked out of. You’ve got to wonder what they were all being paid before–and WHY?
As for other failures, too much time and money was actually spent towards the product relative to original estimates. Like any project, there were unforeseen challenges and delays. However, either the prototypes presented in the Kickstarter were far-under developed, successive generations failed to focus on minimum viable product, or the whole project was doomed from the start by it’s insistence on being the worlds first $100 3D printer. There are reasons that there wasn’t one before and still isn’t now. Clever innovations piled on top of each other might make a great story, a good pitch even, but there are reasons that existing technology incorporates the design choices that it does. It’s one thing to reinvent the wheel, but when you add in better mousetraps and discovering fire you might just be setting yourself up for failure.
I, like many in the backer community are struggling with how to frame this story. Is it a criminal caper or a tragedy? It looks like both.
Oh, and by the way, my Peachy Printer Beta kit is up on ebay–brand new, unassembled, highly collectible.