Client Alert: Fundraising Platform Failures and Increasing Government Scrutiny Highlight Need for Diversification and Ongoing Vigilance by Nonprofits
Date: May 7, 2026
By:
Heidi K. Abegg
FlipCause Chapter 11 bankruptcy converted to Chapter 7 liquidation
On April 28, 2026, Flipcause, the subject of a previous Client Alert discussing donor and nonprofit due diligence, had its Chapter 11 bankruptcy converted to a Chapter 7 liquidation. As a result, the fundraising platform is no longer restructuring and the Chapter 7 trustee must now liquidate assets to attempt to repay the $30 million it owes to creditors, the majority of which is owed to the unsecured nonprofit creditors. This means nonprofits will only receive payment after claims from secured creditors, such as bankruptcy attorneys and investors, are settled. The Chapter 7 trustee may institute “claw back” investigations into the nearly $3.5 million Flipcause paid to its founders prior to filing for bankruptcy.
Scrutiny of ActBlue, Another Fundraising Platform
Scrutiny of major fundraising platform ActBlue, which initially arose out of its foreign contribution screenings, demonstrates that revenue streams from large platforms can also become vulnerable due to both external and internal forces. These forces—which include ActBlue firing its law firm, resignations by key ActBlue staff and subsequent finger-pointing in the press, whistleblower claims, an ongoing Department of Justice investigation, Congressional subpoenas and investigations, a Texas lawsuit, and allegations of serious mismanagement and lavish spending—have led to instability and uncertainty for thousands of nonprofits dependent on the ActBlue platform for their fundraising.
GoFundMe Fundraising Platform Continues to Face Legal Issues
California Attorney General Rob Bonta, on behalf of 22 states, sent GoFundMe a public letter on March 3, 2026, expressing “grave concerns” and seeking immediate verification of the steps GoFundMe has taken to protect the interests of charities and donors. The letter addresses GoFundMe removing unauthorized donation pages for approximately 1.4 million nonprofit organizations and cited Whiteford's previous Client Alert discussing third party fundraising. The states also demand that GoFundMe institute a number of remedial measures immediately.
Fundraising Platforms Sued for Creating Unauthorized Donation Pages
The Alaska Attorney General did not sign onto the 23 State Attorneys General public letter to GoFundMe, but instead filed lawsuits against six fundraising platforms, including GoFundMe, PayPal, Charity Navigator, JustGiving, Pledgeto and Network for Good, alleging they created unauthorized donation pages in violation of Alaska’s Charitable Solicitation Act.
Combined Federal Campaign Update
The Combined Federal Campaign (“CFC”) portal is being decommissioned and charities and donors have been urged to download documents before the CFC site is taken offline. A formal decision on the future of the CFC has not yet been made, but as noted in this previous Client Alert, nonprofits should diversify their fundraising channels.
AI Interfaces and Fundraising
Artificial intelligence interfaces are being trumpeted as helping nonprofits do more with less by providing tools to streamline fundraising and donor management, among other things. While these AI interfaces may save time and money, they may also have unintended consequences if nonprofits lose out on capturing details from potential donors and supporters. For example, if an AI interface includes a donate button, AI is mediating the donation and the newly formed relationship. As advancements are made, such as a verified giving protocol and AI donation routing, nonprofits need to remain diligent. The lessons learned from other fundraising failures are instructive—nonprofits need to look at who owns the right to donations and the data, and who controls the donor relationship.
Key Takeaway and Protective Steps
These discrete events all point to a key takeaway for nonprofits—diversification applies to fundraising as well as to investing. A nonprofit dependent upon one fundraising platform or channel, no matter how established, risks financial ruin if that platform or channel comes under scrutiny, or worse, suddenly shuts down. A crisis can quickly arise, preventing a nonprofit from accessing its donors’ data, and/or not allowing sufficient time to seamlessly transition to another platform or channel. It was only 15 days from Stripe’s termination of its payment processing services to Flipcause to Flipcause’s Chapter 11 filing.
Due diligence prior to engaging a new fundraising platform or vendor is important, but it is equally important to conduct ongoing due diligence. Nonprofits should not go on auto-pilot once the platform or channel is engaged. Small or volunteer driven nonprofits especially should task someone with monitoring performance and ensuring that donations are timely remitted. Due diligence also includes periodic checking of state websites to ensure licenses and reports are timely filed with state regulators (currently, California and Hawaii require fundraising platforms to register and file reports). A missed filing may be an alarm that all is not right, providing a window to update donor records or transition to a new platform. Knowing which third parties your fundraising platform is reliant upon can also help mitigate risk.
A diversification analysis should look at how many distinct fundraising channels the organization has and how much is raised through each. A nonprofit that does not know how much of its funds come from a particular channel or platform does not know where its vulnerabilities are and cannot adequately make decisions about risk and diversification.
As part of the diversification analysis, a nonprofit should review ownership of donor information and access to that donor information. A nonprofit that owns its donor information and can easily extract it, download it and communicate directly with donors will be in a better position to pivot and maintain contact with its donors and supporters if a key fundraising platform or channel becomes unavailable.
The Associations, Nonprofits and Political Organizations practice group at Whiteford has extensive experience and expertise in advising clients on all aspects of fundraising. Please contact Heidi Abegg or another member of the practice group if you have any questions or concerns.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.