I would say there is nothing wrong with a project failing. I don't fund a project thinking "failure is not an option."
However, the projects I have had "fail" were not due to problems related to the project. Instead, funds disappeared, with nothing to account for them. Army Men playing cards had its funds disappear, about the same time the creator took a honeymoon. Somehow, he ended up finding the money and giving everyone a refund.
Another fail, still in progress, is the Asylum playing cards. Ed Nash took a lot of people's money and had the artwork for the cards. He never got the cards printed, and has offered very little in explanation for the status of the project, or where the money has gone. A legal case has started against him in Washington state.
In short, if a project tries, and fails, that's one thing. But if it is simply fraud, that is entirely unacceptable.