In Maine, Democratic and Republican legislators in March introduced a bill that criminalizes “organized electronic theft” from crowdfunding. The bill came after a wrenching incident involving a local couple: After Jennifer and Rodney Hembree lost their 16-year-old daughter Tabytha in a car crash in 2017, someone else set up a GoFundMe campaign to raise money for the family, then stole $7,000 of the funds raised.
Maine Rep. Jeff Hanley was one of the sponsors of the legislation: “It’s one thing to lose your child,” he said at a hearing for the bill. “It’s another to have someone profit from it.”
Danny Gordon, GoFundMe’s vice president of trust and policy, said the company supports these sorts of higher penalties for wrongdoers, but said fraud is already illegal, and that problems are overstated.
“The reality is a bit removed from what’s available in the media,” said Gordon. GoFundMe’s standard line in recent years is that only one-tenth of 1 percent of campaigns are fraudulent. Gordon described the platform’s fraud prevention tools as on par with those of financial institutions.
But watchdog website GoFraudMe argues GoFundMe “specifically allows for a significant amount of fraud to occur on its platform, and that it minimizes this fact in its statements to the media.” The founder of GoFraudMe, journalist Adrienne Gonzalez, said that when she first started the site in 2016 she was swamped with reports of scams like a mother raising money for a funeral of “her very much alive son.”
Gonzalez says she had no particular ax to grind with GoFundMe when she started her website, but she wanted the site to track instances of fraud and to be a hotline for tips that GoFundMe might ignore.
Viral GoFundMe campaigns tend to attract money far beyond the set goal for the particular need, while other worthy causes on the site languish.
A growing number of school districts have banned teachers from raising money for supplies or field trips on crowdfunding sites like GoFundMe—most recently in Nashville, Tenn.—because of the potential for abuse and because districts couldn’t manage the process or the funds. Superintendents have instead encouraged teachers to apply for grants or raise funds through local organizations and businesses.
The superintendent for Dayton, Ohio, district schools announced a ban on teacher crowdfunding last year, saying the district had no way to track the funds. That came after the state auditor’s office recommended school policies on crowdfunding, citing as one of the risks “diversion of donations for private use,” according to the Dayton Daily News.
Fraud, according to CharityWatch’s Borochoff, is expensive for a regulator to go after, so it’s generally not worth it unless it’s a large campaign. Borochoff argues that for that reason, GoFundMe doesn’t know the level of fraud on its site.
“They’re a business,” he said. “Unless the government mandates it, they’re not going to spend a lot of money to verify.”