VDM-NGO Financial Controversy: Navigating the Complexities of Fintech Law" by OJ Chibuzor 2nd Jan 2025.

Recent discussions have centered on the VDM NGO crowdfunding platform, specifically the alarming disappearance of donated funds. Before examining the legal implications of VDM's alleged negligence and breach of contract, let us take a stroll into crowdfunding as a concept within the realm of Financial Technology law.

Crowdfunding, a pivotal concept in Financial Technology law, enables non-governmental organizations (NGOs), institutions, individuals, and entrepreneurs to orchestrate public fundraising campaigns. Typically, these initiatives are hosted on online platforms, where a clear 'project' outline, comprising specific aims and objectives, is presented to prospective backers.

Basically In a crowdfunding arrangement, there are three primary parties involved:

1. The Project Creator (Campaign Creator): The individual or organization are responsible for initiating and managing the project. In this instance, VDM occupies this role.

2. The Backers: These are the contributors and supporters of the project, there provide financial backing in exchange for rewards or equity. Notable examples include philanthropic individuals like Don Jazzy, who donated over 100 million naira.

3. The Intermediary (Crowdfunding Platform): The online platform that facilitate the connection between project creators and backers. In this scenario, the intermediary was TikTok, Facebook and Instagram..

There are various types of crowdfunding, the organizers of crowdfunding can use the various types or means of crowdfunding. The Reward based crowdfunding, in this type of crowdfunding the Backers are rewarded within or at end of the project. Donation based crowdfunding, here the Backers are not rewarded and do not expect any rewards at the end of the project. Hybrid Crowdfunding, this is a type that have combine elements of multiple crowdfunding. etc.

The most used and popular model is the Donation based Crowdfunding,. Since the backer will not get any reward at the end of the project, the Security and Exchange Commission (SEC) will always ensure that the crowdfunding platform is not fraudulent by reviewing registration statements and mandating the Campaign creator to disclose the risk of the project to the Backer. These guidelines are enshrined in the Security and Exchange Commission Atc (2007). However, there are several other laws that regulate Crowdfunding in Nigeria.

For example, an individual may initiate a crowdfunding campaign on GoFundMe, assigning a specific name and objective to the endeavor, it could be a urgent medical situation. The creator strategically selects a suitable platform to reach their target audience. Throughout the campaign's duration, the creator typically provides backers with updates regarding the project's progress and potential risks. Ultimately, upon completion of the campaign, the creator is obligated to fulfill their commitments or obligations including delivering the project and, if applicable, providing rewards to backers.

In the event of an unsuccessful project, which could be seen as breach of contract, the project creator will refund all the donations back to the backers.. Nonetheless, the project creators bears the responsibility of facilitating refunds to the original payment sources and addressing any incomplete donated money with the respective backers.

If a project creator fails to deliver on their obligations, they may be held liable for breach of contract, and backers can take legal action to recover their investments under the Security and Exchange Commission Atc.

Really insightful right?