7 On Your Side: Questions raised about online fundraising sites

SAN FRANCISCO (KGO) -- Crowdfunding is fast becoming the most popular way for ordinary citizens to raise money for a good cause and millions of donors are handing over their money. But what happens to your money once you donate? 7 On Your Side investigated that question.

Some are calling it the Wild West with Crowdfunding sites, and those using them to get donations, are largely policing themselves. We followed the money in a campaign for victims of a San Francisco fire and it reveals the amazing power of online fundraising.

A massive Mission Street fire on Jan. 28, 2015 left 40 people homeless. At the time, ABC7 News mentioned that a GoFundMe campaign was set up to raise money for residents who lost everything.

7 On Your Side spoke to Zack Crocket who is a local blogger who happened to ride by on his bike when fire swept the building. He got upset gawkers were filming instead of helping, so he started the GoFundMe drive.

"I expected, maybe if I was lucky, to raise a few thousand dollars," Crocket says.

To his surprise, donations poured in and suddenly he had $180,000.

"It blew my mind. I guess I never really realized the power of online fundraising," Crocket added.

He also didn't realize the responsibility. Potential donors peppered him with questions.

"I had people emailing me asking for my credentials. 'Who am I? What do I do? Why am I doing this?' At a certain point it got so overwhelming, that I realized... look these people's concerns are totally valid," Crocket says.

Joe Ridout from Consumer Action says, "Online fundraising platforms are so new, that there is no meaningful body or auditor looking at where this money actually goes."

Ridout points out no one in government is watching what happens to billions of dollars raised online. Crowdfunding generated an estimated $16 billion last year and that's expected to more than double to $35 billion this year.

"It's a little bit of donor beware," charitable trust attorney Gene Takagi says.

Takagi says donors also may not realize the sites make a profit off their gifts.

GoFundMe takes 5 percent of each donation and its payment processor takes 2.9 percent. Together, they took $16,000 of the donations intended for the victims of that Mission Street fire. The company tells us those fees keep the platform running.

PHOTOS: Deadly fire in SF's Mission District

Gabriel Medina works for the Mission Economic Development Agency, which partnered with Crocket to manage donations. He told 7 On Your Side, "The fees are a tremendous disappointment."

"How do we make sure that families with more children are treated fairly or single mothers, the elderly? There's no rules," Crocket says.

They had to decide how to fairly distribute $165,000. A couple of con artists did try to claim they lived in the building, but in the end, Crocket handed out checks ranging from $6,000 to $15,000 to 40 victims.

"God bless them... who helps," fire victim Eugenia Lopez said.

Eugenia and Humberto Lopez are fire victims who used their gift for clothes, a bed, TV and dining table, as they bunk temporarily with another fire victim at Parkmerced.

Crocket says he hopes it was fair, but wouldn't mind some way to be sure. He told 7 On Your Side, "There should be a discussion about the vetting process that crowdfunding sites use to make sure people aren't taking advantage of this amazing new technology."

This isn't just a concern about what-if scenarios; there are people in other states that have been complete rip-offs that have taken advantage of these and have been arrested for fraud. Luckily, those cases are rare and a far cry from the honest work of campaigns like Crocket's.