With seven days to go, Indiegogo must explain its fraud checks or suspend Healbe's million dollar scampaign

By James Robinson , written on April 8, 2014

From The News Desk

Over the past three-weeks I’ve been reporting on serious red flags around Russian-based Healbe and their near-$1m Indiegogo campaign for a watch that can allegedly count the calories in what you eat.

Since I wrote yesterday about scores of backers clamoring for refunds before the campaign closes, the clamor has become a roar. I'll write revisit that again later this week. Today, though, I want to move the spotlight away from Healbe and on to Indiegogo, which is still refusing to suspend the campaign, to the bafflement of nearly everyone I've spoken to for this story.

Previously, Indiegogo swore that it had investigated Healbe's campaign, but that it had cleared the platform's fraud checks. As the campaign enters its final week, set to take home $985,000 from Indiegogo users, the pressing question is now of course, how?

“I can certainly tell you on the record we did investigate this campaign. That's why we could make the statement to you that at this time we have no reason to believe it's fraud,” Shannon Swallow, Indiegogo’s head of communications and marketing, told Pando via email after we’d published our first dispatch about Healbe.

According to a statement supplied to Pando by Indiegogo at the same time, the company’s approach to fraud consists of “mainly” the following three things: a proprietary algorithm “not dissimilar to how credit card alerts are triggered,” the “social dynamics and democratic nature of crowdfunding” and Indiegogo’s own fraud investigation team.

Let's break that down.

The proprietary algorithm is useless here: the campaign is run by real people, not a spambot. The claim is that those real people are using junk science to fleece supporters out of close to a million dollars. The only way an algorithm detects that is if it's somehow capable of automatically reading scientific papers, searching through patents and talking to experts. Maybe one day a crowdfunding platform algorithm will be able to do that but, for now, it remains the job of a journalist.

That just leaves the wisdom of the crowd and Indiegogo's own human fraud team.

Right now, helped by our reporting, and that of others, the crowd is doing its job pretty well. There are dozens of requests for refunds now in the comments page for Healbe GoBe’s Indiegogo campaign page. There’s no way of knowing how many more refund demands are coming in through private channels.

The Healbe GoBe campaign is so blatantly ridiculous that the crowd has put my coverage of the scam on the front page of Reddit twice. Healbe has even spawned its first Indiegogo parody page, a sham campaign that, fittingly, also sailed right past Indiegogo’s “proprietary fraud algorithm.”

Former Healbe supporters have confirmed that they contacted Indiegogo and asked them to investigate the campaign. “I wrote to IndieGoGo to ask them to personally review the campaign for possible fraud or to act as an intermediary with an independent source who could verify the claims," one refunded Healbe supporter told me yesterday. "A day later I received an email from IndieGoGo, telling me they were aware of the concerns and had cleared them through their usual fraud detection system.”

When we first wrote about Healbe, Indiegogo bragged to us that, “Our community of credible, conscious participants help to make Indiegogo the world’s largest, most trusted global crowdfunding platform.”

But now Indiegogo's own fraud team is choosing to willfully ignore the wisdom of the crowd, these “credible, conscious participants” having decided en masse that the Healbe campaign is bullshit. The company hasn’t made any comment on this story for eight days now but it did silently delete its promise to catch “any and all” fraud on the site.

Not only is Indiegogo ignoring the crowd, it's also complicit in a scam that's about to rob that same crowd of close to a million dollars. Indiegogo offers flexible funding, and treats all donations to campaigns as nonrefundable. Right now, Healbe seems to be still processing refunds, perhaps in an effort to avoid chargebacks which might trigger an investigation by Paypal or banks.

So what on earth is Indiegogo's fraud team thinking here. My best guess is one of two things:

Either Indiegogo is waiting for Healbe's campaign to close next Tuesday and hoping that, somehow, the whole fuss will just die down on its own. After all, if it pulls this one campaign from Healbe, it has to admit that its entire fraud process is broken. That means it'll have to review the entire way it runs hardware campaigns and admit that its no gatekeeping, flexible funding approach is rife for abuse like this. It's a possibility -- albeit a grotesque one -- that Indiegogo is willing to burn users to the tune of $1m, rather than have to retool its entire business.

Or maybe -- just maybe -- Indiegogo knows something that we don’t. Maybe their fraud team really has investigated Healbe and given it a clean bill of health. Possibly its investigation has uncovered things that contradict the wisdom of its own users, the laws of science and a three-week investigation by Pando into Healbe’s claims.

There's an easy way to solve this. Indiegogo needs to put its mouth where the crowd's money is: either explain why it cleared Healbe or pull the campaign. Until they do one of those two things, the company’s management, founders, board and investors are all complicit in silently abetting a million dollar fraud. Shame on them.

See here  for the latest updates on this story.

[Image adapted via wikimedia]