We should be admiring them for taking risks like these. If it worked, it would have been quite awesome. And now that it's failed, everyone received their money back, so no harm was done whatsoever.
Yes, it was their choice to return the money rather than pivot the project, but that's irrelevant -- the fact is that they returned all the money to the backers and chose to absorb the $11k loss themselves. This is behavior we should be encouraging, rather than trying to discourage people from daring to dream and to take harmless risks.