Lessons From the Flipcause Collapse

Flipcause, a fundraising platform for nonprofits, was sold out of bankruptcy last month for $400,000. This marks a new chapter for an organization that collected donations for thousands of nonprofits but eventually failed to pay them, leaving groups scrambling for funds they expected to receive.

In November, amid mounting complaints from charities about delayed payments, the California attorney general’s office discovered that the company was not properly registered and demanded it stop raising money in the state. Flipcause’s payment processor, Stripe, then terminated services and froze Flipcause’s funds.

Flipcause filed for bankruptcy protection in December, stating that it owed $29 million to 3,200 charities.

The company said it had just $70,000 in its account, according to the bankruptcy filings. As first reported in Oakland Voices, court documents show the owners had paid $3.83 million to themselves, family members, and related entities in the year preceding the bankruptcy filing.

“It has the characteristics of a Ponzi scheme,” says John Mills, an Atlanta lawyer who serves on the advisory board of Pro Bono Partnership of Atlanta and is representing two charities owed money by Flipcause. “You’re signing up new people, and you’re using the new money to pay the old members.”

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Lawyers with the Ponist Law Group, which is representing Flipcause in the bankruptcy case, declined to comment. At a hearing in December, Emerson Ravyn, Flipcause’s executive chairman, maintained that donations made through Flipcause belonged to the company, not the nonprofits.

Many groups were drawn to Flipcause for very good reasons. The company not only processed donations but could do much more, including build a website, create donor lists, arrange peer-to-peer fundraising, set up an online shop, and help with communications.

That was part of the appeal for Erin Campbell, who was looking for help at her newly incorporated charity, the Athens Area Diaper Bank, in 2019. Plus, other charity leaders had recommended it. “We had zero employees,” Campbell recalls, “and a mom with a minivan managing it all.”

Flipcause didn’t offer the sleekest interface, Campbell says, but she signed on because the price was reasonable compared with the competition and the company provided a lot of support.

Charities had to submit a request to Flipcause to have the donations passed along; it didn’t happen automatically. The delays began in 2024.

“For years, we would get money as soon as we requested it — within one to seven business days,” Campbell says. “And then things started to kind of take a little bit longer — maybe two weeks. And then four weeks. And then eight weeks. And then 12 weeks. We were like, ‘This is ridiculous.’”

The diaper bank stayed with Flipcause until last September, when a new development director persuaded the charity to switch to Givebutter.

Flipcause still owes the charity $15,000, Campbell says. The transition to Givebutter caused disruption and cost a lot of staff time at the charity, which now has four employees. And while supporters of the diaper bank have generally been understanding about the Flipcause losses, Campbell says, the charity lost some recurring donors when it asked them to transition over to Givebutter.

A Class-Action Suit

The diaper bank is one of 70 charities participating in a class-action lawsuit that seeks to hold Flipcause’s executives responsible for creating “a financial nightmare for the thousands of charities that entrusted it with their donations,” according to the suit.

Many other charities had it even worse. 805 UndocuFund, a California charity that helps undocumented individuals and families facing immigration enforcement, is still owed more than $350,000.

“They’re one of the key frontline organizations protecting immigrant communities,” says Geoff Green, the CEO of the California Association of Nonprofits. “You couldn’t come up with a more vulnerable population. For such a critical organization to become a victim of this just makes it all that much worse.”

No criminal charges have been filed. Mills says he hopes that California’s attorney general will use the threat of criminal charges to encourage Flipcause’s owners to recover more of the missing funds.

The Flipcause debacle has value as a cautionary tale, Green says. “It will remind people that the worst situation can happen — your money can be stolen by a vendor.”

What can charities do to try to avoid getting swindled by fundraising platforms in the future? Here’s some advice from legal and nonprofit experts.

What to Watch Out For

Choose a vendor that puts donations directly into your account.

Flipcause had a single account. Charities had to request that funds be transferred to their own accounts. Software4Nonprofits, the company that bought Flipcause out of bankruptcy, says the single biggest change that charities will see is that donations will go straight into their own bank accounts. The process could still take a few days — like a personal bank transfer might — but donations made on a Monday should appear in the charity’s account no later than Thursday.

“It’s a huge change in how this model works,” says Danny Vivier, co-founder of the holding company that owns Software4Nonprofits.

Weigh the risks of a one-stop shop. 

Many small charities moved away from more-established payment processors like Paypal in part because Flipcause promised to focus on the work of nonprofits and do more for them. Charities like the Athens diaper bank became enmeshed with Flipcause, making it difficult to break off the relationship at the first sign of trouble.

“For these small organizations, much of the work is done by volunteers,” Green says. “If you don’t have to do it, you’re not going to do it — you’re trying to serve the mission. That’s the reason these package deals can be attractive, but it’s also the fatal flaw if something goes awry.”

Is it registered?

California is one of only two states (the other is Hawaii) that require charitable fundraising platforms to be registered. Any national fundraising platform is likely to work in California, so if it’s not registered there, that’s a red flag.

Flipcause is based in Oakland, and yet it failed to register in California.

“It’s not hard to look up if someone is doing their duty,” Green says.

Run the contract past a lawyer.

Mills, who represents the  diaper bank, obtained a standard Flipcause contract as of September 2024. It contains what he calls “squirrelly language” that potentially gives the company leeway to use donated funds in its own operations.

The problems with the more-than-20-page Flipcause contract “aren’t going to jump out at you if you’re not used to reading this kind of stuff,” Mills says. Many cities and states have free or low-cost legal services, like Pro Bono Partnership of Atlanta, that are set up to help charities that can’t afford to pay.

“There’s a way to get a lawyer, probably pro bono, to take a look at these things for you,” Mills says. “If a nonprofit had come to me and shown me this contract and said, ‘What do you think?’ I’d have said, ‘Do business with somebody else.’”

Insist on transparency.

Can you keep tabs on your account? A personal brokerage account allows you to log in at any time to see your holdings; a fundraising processor holding donations for a charity should offer the same visibility.

“If you can’t have eyes on it through some sort of customer portal, they could tell you you received $1,000 on Monday, when maybe you actually received $2,000,” Mills says.

Monitor the vendor.

Boards and executives have a fiduciary duty to act in the best interests of the charity, which includes taking steps to identify and root out fraud. The problem at small charities is that there are typically few employees wearing many hats; it may not be clear who is responsible for overseeing the fundraising vendor.

“Some charities kind of forget about that until things start going south,” says Heidi Abegg, a lawyer who represents a handful of charities that are owed money by Flipcause. “If it’s a small volunteer-led organization, it’s easy to think that someone else is handling it. Then no one’s really paying attention.”