Coolest Cooler ends up costing over $4 million to Kickstarter backers (2023)

When Susan Grossman first saw Coolest Cooler on Good Morning America in 2014, it quickly became a national sensation.

The innovative freezer features a built-in bottle opener, USB charger, LED light, wireless speaker and a stirrer for mixing drinks at the beach. It sounded so pleasing that Grossman decided to buy one for himself for $200 each.

As it turns out, Grossman didn't actually buy the refrigerator. It emerged on a site called Kickstarter, which looks like an online store but is actually a crowdfunding site for entrepreneurs, artists and others seeking financial backing for their ideas. They often promise products in exchange for this support, but nothing is guaranteed.

In a matter of weeks, Portland-based Coolest Cooler raised $13.2 million on Kickstarter from 62,642 backers across the country and around the world. For many backers, it was their first experience with online crowdfunding, and at the time it was the largest project in Kickstarter history.

But six years later, Grossman and more than 20,000 others still don't have a refrigerator. And they have no money.

Dubbed the biggest disaster in Kickstarter history, Coolest Cooler went out of business last year and just endedTerms of the Legal SettlementIn cooperation with the Oregon Department of Justice. The agreement was to provide $20 in compensation to sponsors who never received the refrigerator. It's only a fraction of what they lose, but most don't even get.

Now, using Kickstarter data and data from the Department of Justice, you can get the final tally of Grossman's and other backers' losses.

Anything in the saga, including reconciliations, is eligible:

• 41,880 refrigerators were received, most of which were many years behind the promised delivery date. Another 20,762 received nothing.
• Under the terms of Oregon's 2017 Coolest Cooler Settlement, those who didn't receive a refrigerator were entitled to $20, one-tenth of what they paid for the refrigerator. However, only 7,232 people actually received the money.
• Another 13,530 people didn't receive their refrigerators or their $20 because they either didn't respond to Coolest Cooler's address confirmation, or because they did, and the Portland company didn't send the settlement money.
• Based on the $20 return, backers lost a total of nearly $4 million.
• Kickstarter and its payment processor have raised about $1 million in fees related to the project. This includes $321,000 from sponsors who did not receive refrigerators or were only refunded $20.

Kickstarter websiteexpressly disclaims responsibilityFor lost sponsor funds and refuse to consider refunds. The New York company still describes Coolest Cooler as a "we love projecton its website.

"Why can't they share the money? We humans bought it because of them. That's where we got it," said Grossman, who lives in Houston. He held Kickstarter accountable for the mess and keeping the project fee.

"They made all the money," she said. "We have asses."

ice making

Coolest Cooler exposes the ugly side of crowdfundingThat was built for craftsmen and small businesses. They use Kickstarter and similar sites to build online communities of backers to fund their creative visions.

But, for a novice entrepreneur, it's easy to blow his head.

In 2014, Ryan Grepper was a 30-year-old homeless man who had lived in Montana, Arizona and Southern California before settling in Portland. He sold medical supplies and developed a lightweight travel scale that was sold at SkyMall, but was completely unprepared for the development of Coolest Cooler.

Morning TV shows, lifestyle magazines, and clickbait sites all promote Coolest Cooler.

At first, Grapper was preoccupied. Pop culture site Mashable crowned him "The new king of Kickstarter”。

Initial plans called for production to begin within four months, with the first coolers arriving shortly thereafter. However, things almost immediately took a turn for the worse as the complexities of outsourcing large-scale manufacturing to China hit the nail on the head.

It took a year for the first shipment to leave the factory, but Grepper insists it will still have refrigerators for all its followers in a few months. Instead, there was a series of mistakes and failures.

For the next five years, Grepper blamed factory strikes,President Donald Trump's trade war,amazonand many others were unable to deliver the remaining refrigerators. In an email this month, he repeated those explanations but insisted he did his best.

"We did our best, but in the end it wasn't enough, and I truly apologize to those who let us down," Grepper said in an email earlier this month. A year ago, he closed the company,Handle remaining stockAfter resigning from supplying surplus refrigerators.

Kickstarter says it has taken steps to improve itself since Coolest Cooler launched six years ago. These include helping project developers create a budget for their products, establishing clear terms of service should a project fail, and blocking the "typical" hype of online shopping sites.

Kate Bernyk, Kickstarter's director of communications, didn't directly answer a question about whether the company was considering refunding the cost of Coolest Coolers that were never delivered. Kickstarter charges a 5% fee for projects that appear on its site, and its payment processor charges an additional 3% to 5%.

However, Bernick said in an email that the company is not liable if sponsors lose money.

"Creators whose projects are funded enterSign directly with sponsorsAs stated in our Terms of Use," she wrote. "Kickstarter is not part of the deal between creators and sponsors, and we are sure we cannot guarantee the outcome of a project. "

According to Bernyk, the company won't retroactively remove the "Project We Love" title from its crowdfunding campaign once it's over. She said the label was applied internally when Coolest Cooler was raising funds in 2014.

When Kickstarter started using the term publicly, it automatically applied to current and previous projects, including Coolest Cooler from 2016.

reach the settlement

The Oregon Department of Justice began investigating the Coolest Cooler fiasco in 2016. Nine months later, he reached a settlement with Grepper.

The agreement calls for Grepper to provide refrigerators to all supporters in Oregon, as well as to all out-of-state individuals who file complaints with the state. He also had to offer $20 refunds to the more than 20,000 others who never received their fridges.

Or at least that's how the department described the settlement at the time.

However, only one-third of those who didn't get a refrigerator got $20. Henry Flores, a firefighter in Huntington Beach, Calif., said he only got a check for 55 cents.

With no fridge arriving in years, the coolest cooler became a running joke at his firehouse, Flores said.

“I thought I gave you money and I got something in return,” Flores said, saying his friends made fun of him when they bought used Coolest Coolers on eBay or ordered them from Amazon.

Grepper, the founder of Coolest Cooler, did not respond to an email seeking an explanation of why so few people received their $20 bills — and why some, like Flores, received much less. The individuals apparently did not respond to address confirmations or did not immediately respond, the Justice Department said.

In 2017, Grepper agreed to pay a $50,000 civil penalty as part of a settlement with the state, but Oregon said it would waive that penalty if it complied with all other terms of the settlement.

After all, Coolest Cooler sent $20 to 7,200 of the nearly 21,000 people without refrigerators. And the state did not force Coolest to pay the $50,000 fine.

Grepper did not respond to a query for clarification, but the state said "ambiguities" in the law in the 2017 settlement resulted in limited spending.

According to Assistant Attorney General Robin Skarstad, the state's position is to require Coolest Cooler to send $20 to all sponsors who haven't received a refrigerator. However, Skarstad said Coolest was trying to "limit the reach" by requiring people to confirm their addresses before receiving the $20 settlement.

According to Skarstad, the Justice Department concluded that the language of the original settlement may have allowed Coolest and Grepper to take additional steps. A review of the company's finances showed it couldn't afford to pay the $20 each, let alone a $50,000 civil penalty, she said.

As a result, Oregon allowed Grepper and his company to continue providing proof of address and waived the $50,000 fine. Grepper's company saved $270,000 by paying $20 in restitution to one-third of the people who didn't get a refrigerator.

"It certainly didn't complete everyone. I really regret it," Skarstad said. "It's the best we can do."

The DOJ asked Coolest to send sponsors 55 cents to reimburse them for mailing costs to confirm addresses and qualify for $20. The department said the company mistakenly mailed the 55-cent check separately from the $20 settlement.

People who submitted address confirmations but did not receive money, DOJ saysYou should call the Consumer Protection Hotline.

However, Flores said he did it only to find out where his $20 went. He said the state sold him out.

“(Their) position is that at least Oregon has done something. (Although) other states have not,” Flores wrote in an email.

According to Flores, the state of Oregon told him it could be filed in small claims court and said he had no plans to take any further action: "They've done it."

Flores said that if he had known in 2014 that Coolest Cooler was a crowdfunding campaign and not a retail site, he would never have supported the project. He said he thinks it's an insult that Kickstarter still refers to Coolest Cooler as "a project we love."

"I'll never use Kickstarter again," Flores said. "I'll tell you this."

--Mike Rogoway|Twitter:@rogoway