Break'n News - Crowdfunding drives are raising millions for charity. Here’s how to give without getting scammed

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Americans have opened their wallets in response to crises like Covid-19 and racial injustice, according to the most recent data from the Association of Fundraising Professionals.

The organization reports a 7.6% increase in the amount donated through the first nine months of 2020. Leading the surge: smaller contributions of $250 or less.

At the same time, nontraditional fundraising drives, through crowdfunding sites like GoFundMe, had unprecedented success last year. According to the site’s 2020 Giving Report, the year included the largest single fundraiser in the site’s history — $44 million to fight hunger in a drive led by Leonardo DiCaprio and Laurene Powell Jobs.

GoFundMe also said it attracted $625 million in various fundraisers for Covid relief between March and June, and 500,000 donors contributed to the Official George Floyd Memorial Fund, the most individual donors ever attracted to a GoFundMe drive.

Add to that thousands of small drives for everything from people’s medical expenses to their college tuition, and charity experts agree that crowdfunding is a formidable alternative to traditional charity fundraising, and it is likely here to stay.

Boston-based marketing consultant Julia Campbell, who works with nonprofits, attributes the shift to what she believes is an unwarranted mistrust of charitable institutions, particularly among younger donors.

“They don’t want to give money that they feel like is going to be run through some kind of institution,” Campbell told CNBC’s “American Greed.” “I think that’s been affecting the nonprofit sector even more so as trust goes down.”

But donating to an online fundraiser — whether through GoFundMe, Facebook or other sites — can carry its own risks despite extensive safeguards the platforms have put in place.

Crowd scamming

In one of the most notorious cases of fundraisers attempting to crowdsource a fraud, a New Jersey couple, Mark D’Amico and Katelyn McClure, raised more than $400,000 to help Johnny Bobbitt — a homeless man McClure claimed she encountered after running out of gas in Philadelphia in 2017.

As the three told the story, Bobbitt was a veteran, down on his luck. He saw McClure stranded on the side of a road and came to her aid. He walked to a service station, spent his last $20 to buy her gas, and helped her on her way.

A picture of Katelyn McClure, right, Mark D’Amico, center, and Johnny Bobbitt Jr. is displayed during a news conference in Mt. Holly, N.J., Thursday, Nov. 15, 2018.

Seth Wenig | AP

D’Amico has pleaded guilty to a single state charge of misapplication of entrusted property and has been sentenced to five years in prison. But he has pleaded not guilty to a 16-count federal indictment for fraud and conspiracy. His trial is on hold because of the pandemic.

GoFundMe said it honored its guarantee and refunded all of the money raised in the fraudulent campaign, making the 14,000 people who donated whole.

CEO Rob Solomon told NBC News in 2019 that the site beefed up its antifraud measures in the wake of the attempted scam. The site relies heavily on its community of users to report suspicious activity. He said the 2017 fraud could not happen today.

“Misuse on the platform is very rare. Less than one-tenth of 1 percent of all campaigns result in misuse,” he said.

Sniff test

If an online fundraising campaign strikes a chord with you, and if you are convinced that an established charity cannot meet the need, Campbell suggests stepping back and doing some extra due diligence before you donate.

“There’s a sniff test,” she said. “What’s the purpose? How will the funds be used? Does that sound in any way suspicious?”

Look for details about the intended recipient of the funds. Seek out their social media profiles.

Charity begins at home

GoFundMe says it has attracted 65 million donations in its 10 years of existence, including many that went to charities. The organization says 110,000 charities have benefitted from its fundraising campaigns.

Campbell believes the platform has resonated with people who want to take a more hands-on approach to giving, rather than donating money to a big, impersonal, national charity.

“They want to go and actually give coats to homeless people. They want to make sandwiches and give them out,” she said. However, she added, a more effective approach may be to contribute to local organizations.

“I believe in national charities, but giving locally and just giving to causes that are close to your heart, giving to nonprofits and helping build up the capacity of your local library, your local food bank, your local shelter, that’s the best way to help the community,” she said.

Experts agree that notwithstanding last year’s fundraising records, many charities have been forced to lay off employees or cut back on services because of the challenges of operating in the pandemic.

That makes it important to keep on giving, no matter the platform, and no matter the amount.

“I think the perception is that $10 is going to go into some deep, dark hole,” Campbell said. “Trust me when I say $10, especially if you do it monthly, can make such a huge difference to these organizations.”

Just do some homework before you give.

See how crowdfunding fraudsters are attempting to corrupt the system and steal from the truly needy. Watch an ALL NEW episode of “American Greed,” Monday, Feb. 22 at 10 p.m. ET/PT on CNBC.

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