There is potential for fraud in pretty much everything these days. Crowd funding is a risk just like the stock market, or any other kind of investment. If it succeeds then you reap the rewards, but if it fails then.. oh well. The difference is you just lose what you invested. That is why it is important to do your research before making your investment. Check to see if the person/s making the project are legit.
The only crowd funded project i invested in so far is Planetary Annihilation. Why? because they had something tangible to offer, and the developers have a long history of producing good games. Now that the gamma is out i can safely say i am reaping the rewards of my investment. I am considering investing in Star Citizen for the very same reasons.
However some of the crowd funding prices do seem a little ridiculous. Like 99 bucks for early access for games where the first line of code isn't even written yet. Like what was said earlier. They show some concept art, and a game summery. If you want to fund your game then start small. 15-20 bucks is more than reasonable for an early investment to get you going. Then when you get your product up, and running. With a working demo. THEN talk about offering your "supreme" 99 dollar packages.
IF a project does fail. Then the developer/s (if they are truly reputable) "should" reimburse the people that invested as best as they can. However if it's a small time, or single person developer i wouldn't hold my breath on that, because he/she is probably developing this in his/her home pc.
Again, It is all about risk. Do your research, and buyer beware. There is great potential in crowd funding. If it is done right.
