This paper aims to find out the mechanism to prevent fraud of crowdfunding. In a crowdfunding activity, because the cost of state verification is higher than the value of investment, no investor wants to do state verification. A model developed to explain the decision making process of investors and project initiators of a crowdfunding project. Without state verification, the higher the value of private interests of the project initiator, the lower the possibility of fraud. When a third party does state verification for a crowdfunding project, there is no fraud. In this case, the value of private interests is negatively related to investors’ expected return due to decrease of expected default recovery.