Earlier quoted context omitted.
> How has no one done this before? Lots of crowd funding projects have done this. Just look at the Jolla Tablet [0] if you want a concrete example of a company using backer's money as an interest free loan without delivering anything. Fortunately for Jide backers, they're actually receiving a refund. Jolla has been giving their backers excuses for why they cannot return the funds for the past 2.5 years. [0] https://e…
I mean, this is how crowdfunding works. If you're not willing to risk getting nothing in return for your money, then don't crowdfund. You need to evaluate the people proposing the project before deciding to trust them with your money. There should be no expectation of a refund if the project fails.
There are plenty of markets with risks to the investors that still have boundaries. If a mutual fund picks badly and loses money, that's an issue for the investors. If a mutual fund turns out to be using your money on personal bets (like the London Whale) or simply stealing the money outright, that's a legal issue.