I think that the key is openness and honesty. It's my understanding that the insurance company offices were closed when the baby was born, so there was a period of time when they genuinely didn't know if their medical bills would be covered - bloody scary, I am sure.
I think it would have been more sensible for the dad's employer to have waited until they got an answer either way from the insurance company before starting to fundraise, but I can understand the wish to help his friends who were in a scary situation.
If they had been open and honest from the get-go, I would have been much less concerned with it - if the fundraisers had said, 'We are raising funds in case the insurance company don't cover the medical bills, and so that Dax's parents can pay their ongoing bills back home, whilst they are in NY with him' - and if they had made it clear, as soon as they knew, that the insurers would be paying the medical bills - then I wouldn't have had a big problem with it. People would have known the facts, and could have made an informed decision about whether or not to give money.
As I said earlier - I also think they should have kept records of what was spent and how it was spent - so they could demonstrate that any expenditure had been in line with what people believed they were donating for.
But I don't think they were open and honest, and I do think they were a bit too focused on getting the money. I find it rather suspicious that they did not want to follow up any suggestions of how to get more clothes and other necessities out to them from their home, but just seemed to want to buy new. To be honest, if I was in that position, the last thing I would want to have to do is to go shopping.
If they had said that they were going to pay to have a couple of boxes of clothes etc airfreighted out to them, I would have thought that was a sensible and reasonable use of some of the funds that had been raised.
I think crowd funding (which is what this really is) is fine - as long as the people asking for the money are open and honest, and as long as the money is spent on the item/s it is raised for. I've recently seen a campaign on my FB - someone's friend wants to buy a new kiln for his pottery business. He is asking for money for a new kiln - if you give £10 or more, you will get a hand made bowl. This, to me, is a perfect example of crowd funding - he's been entirely open about what he wants and why, and people know what they will get if they choose to donate.