Apr 4, 2014 · 7 minutes

One scam slipping past Indiegogo's fraud algorithms might be carelessness. Two starts to look like complicity.

For the past couple of weeks Pando has been reporting on Healbe -- a near-$1m campaign on Indiegogo for a calorie counting watch that doctors and scientists say can’t possibly work. Despite countless red flags, Indiegogo has refused to suspend the campaign.

Now Pando has learned that Healbe isn’t the first company to use Indiegogo to collect hundreds of thousands of dollars for an apparent medical miracle, only to be accused of misleading its backers. Less than six months ago, another company -- Toronto-based TellSpec -- closed a massive campaign but has already compromised many of its grand promises to revolutionize diet and nutrition, leaving Indiegogo users currently out of pocket to the tune of nearly $400,000. With that campaign, as with Healbe, Indiegogo has taken no action to protect its users.

Founded by CEO Isabel Hoffman, whose big thing before this was anti-aging medicines, and CTO Stephen Watson, a York University math professor, TellSpec claimed to have created a small scanner that you could fit on a keychain and wave over your food to get live nutritional information about what you were eating.

Physicists weighed in that the scientific claims made by Hoffman and Watson were at best dubious and at worst a blatant scam. According to TellSpec’s Indiegogo page, their food scanner would be powered by a “Raman spectrometer,” which puts out pulses of light to measure particle density and collect a detailed fingerprint of the food which is then analyzed in order to calculate nutritional information.

Physicists called bull. Raman spectrometers are weak, big and expensive. To do this scan accurately you would need to be sending out a high density of wavelengths from the spectrometer, fueled by a high-powered source, not a tiny rechargeable battery as TellSpec claimed. It would be impossible, many people said, to miniaturize this so dramatically and to do so for a $250 price tag. That’s without taking into account that most experts suspected the technology would be useless in assessing the finer details of food texture and detecting small trace ingredients in low concentrations, like the food allergens it swore it could find.

When pushed on how accurate the device could be and whether it could live up to the many medical applications it might have, TellSpec acted in almost exactly the same way as Healbe. The company walked back its performance claims, while not admitting that their science was bullshit. Which is a convenient way of saying, hey, we want your money, but not your FDA-related scrutiny.

The weasel words used by both Healbe and TellSpec get to the heart of the real problem at Indiegogo: how exactly the crowd-funding platform defines “fraud.” Like Healbe, TellSpec is a real company that appears to have tried to make a physical thing. But on setting up their respective campaigns on Indiegogo neither appears to have been in any way honest about the medical claims it made for those physical things.

The TellSpec campaign video features Watson and Hoffman waving the small device - which makes a classic “boop” sound when it scans, a lot like a barcode reader at an old school supermarket checkout - over a salad, a tostada, an apple and a chocolate truffle. Results flash up like magic inside a smartphone app, which the two founders discuss earnestly.

“This tostada contains Tartrazine,” Watson declares, woodenly. “A food dye made from petroleum. In the UK and Europe there would be a warning on the package.”

Except it turned out the entire video was a fake. Bowing to pressure from online commenters who doubted that the scanner could work as described, TellSpec quietly added a disclaimer that ran over the first 25 seconds of the video.

“The device shown in this video is a 3D model representing the future industrial design of the TellSpec scanner,” it reads. This is “not a working device” and is being used “solely for the purposes of demonstration.”

No such disclaimer is included in Healbe’s hastily put together demo video, apparently produced in response to mounting skepticism over whether their device existed at all. But, well, just look at it.

Thanks to the disclaimer-free version of their video, TellSpec raised $386,392 on Indiegogo. Without the disclaimer Hoffman and Watson act with such seriousness and self-importance that you’d have no reason to doubt that this was the finished product right there in their hands. They clearly don’t want you to know they’re acting. At what point is a fake demo “fraud” according to Indiegogo’s definition. At what point are they obliged to suspend the campaign?

“TellSpec was first tested on a prototype with a large spectrometer, then we adapted it to the nanochip,” Watson tells the camera, near the end.

“After nine months of hard work we are ready to move to the production of TellSpec,” Hoffman concurs, finishing his sentence.

These are two magic sentences to hear if you’re a crowdfunder thinking about throwing some cash into the pot. But the problem is that the behavior displayed by TellSpec in the four months since this campaign closed at the end of November has exposed these words to be bald-faced lies. After the campaign closed, TellSpec's actions have shown it has no idea how to make the device that it presented to Indiegogo as being ready to go on the basis of nine months of work and research.

On November 18, TellSpec posted a “Live demonstration of technology” on its YouTube page. Unlike the small, less than palm sized device promised on Indiegogo, the scanner used in the four-minute video is much larger, doesn’t operate wirelessly and has a secondary part crudely taped onto it.

Once again TellSpec displays its knack for misleading videos. When the camera focuses in on the phone to show off its analysis of the food being scanned, the phone’s clock is clearly on display. The first result is from 1:30 p.m., but in the next shot it’s 1:21 p.m., 1:22 p.m. and 1:23 p.m, before jumping back in time again to 1:15 p.m., 1:18 p.m. and 1:19 p.m. What we’re clearly seeing is not a live demo, but a series of cut together clips which cast doubt on whether what’s shown on screen has any connection to what was scanned by the device.

On December 31 they posted a similar video, sans sloppy editing, which features Hoffman and Watson boasting at having refined their technology down somewhat, a full month after they’d banked nearly $400,000 for having claimed to have perfected it.

In the following two months, no new videos were posted. Then surprise, surprise, in mid-March, TellSpec updated their Indiegogo page to say that they were ditching the technology that they claimed in the video to have spent nine months working on. The TellSpec scanner wouldn’t have a Raman spectrometer in it, but would instead feature Texas Instruments’ DLP technology, essentially a series of micro-mirrors that switch on and off at high speed. The new shipping date for supporters was pushed out from August to December. Some commenters greeted the news with enthusiasm, saying that the Raman spectrometer was too complicated to be miniaturized and still work. The majority of onlookers, however, remained as skeptical than ever.

The thing that can’t be stressed enough here is that four months after closing a massive Indiegogo funding round for a product it claimed it could make, TellSpec had to reset the clock on its production. Four months after banking $386,392, Hoffman and Watson discovered that, as experts had been arguing from the start, the idea they had lied about having perfected wasn’t technically possible. Still, to Indiegogo this is all apparently just a natural risk of crowdfunding, as opposed to blatant fraud.

I called TellSpec for comment. A bubbly sounding assistant picked up the phone. Hoffman and Watson weren’t in the office, she explained, but she was happy to answer my questions. Except, when I asked her about the change in production plans and the shift from Raman spectrometers to DLP technology and why it took four months to figure this out and how the company viewpoint had changed, from what it knew now to what it knew going in, she didn’t seem so keen. Hoffman and Watson were travelling to parts unspecified. Maybe I could talk to them, just not for a few days. She’d email me through some information. She eventually sent me through a link to the updates section of their Indiegogo page.

Today we’re apparently seeing the same story play out with Healbe. As with TellSpec, Healbe’s campaign was dishonest from its inception: a Moscow company claiming to be from San Francisco, lying about its CES unveiling, so sure about its product until pushed on it, when all of a sudden it says that it is still working things out, talking up internal data and tests until people asked for them, when all of a sudden, the tests are now still underway. The only difference is that Healbe’s campaign is still underway, and there’s still a chance for Indiegogo -- or one of their board members or investors, or anyone able to influence the company’s management -- to do the right thing.

Unfortunately, the more we learn about previous scams on the Indiegogo platform (and there are certainly more to emerge as we keep digging), the less likely it seems that they will.

See here  for the latest updates on this story.