The Federal Trade Commission (FTC) filed a lawsuit against a startup that promised its crowdfunding backers a smart backpack. However, Douglas Monahan and his company iBackPack, spent its proceeds on bitcoin and credit card bills instead.

“If you raise money by crowdfunding, you don’t have to guarantee that your idea will work,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “But you do have to use the money to work on your idea — or expect to hear from the FTC.”

According to the complaint, iBackPack raised $800,000 from consumers to “develop a handful of products” which included a smart backpack that had batteries to charge phones and laptops. Rather than supplying the iBackpack, the FTC said that Monahan allegedly spent the money on “personal purposes.”

The FTC further claimed that Monahan threatened complainers online. “Despite Defendants’ repeated assurances, Defendants have not used contributions to produce and distribute completed products. Instead, Defendants have used a large share of contributions for Defendant Monahan’s own personal purposes, such as making bitcoin purchases and ATM withdrawals and paying off personal credit cards; for marketing efforts to raise additional funds from consumers; and for other business ventures.”

“Hundreds of consumers have complained about Defendants’ failure to produce the products. Some consumers have also complained that Defendant Monahan sent threats to try to silence their criticism, including by telling one consumer that he knew where the consumer lived and had other personal information about the consumer, and by threatening to sue another consumer and his employer for libel and slander.”

Coindesk reports that the FTC has asked Monahan for “permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies.”

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