I have no idea if FundersClub is wildly profitable or not, but I thought that "validating a business model" meant the model was profitable, not just legal.
Even in the case of copycats, if the idea has legs enough to spawn copycats, that may also speak to its viability. Groupon is a great example of this. Despite Groupon's own troubles, it has spawned a number of copycats that appear to be doing quite well.
In short, validation doesn't necessarily mean profits. It could mean high signup rates with the later potential to monetize (ala Twitter), or it could mean copycats, or it could mean (of course) profits.
In a lot of cases, this is valid. If you're a Venture Capitalist, for example, if you're waiting for a business to become profitable on its own, then you're not getting terms that are nearly as good as if you'd acted earlier. So even amongst those in the know, "validation" can be seen as something far less than absolute dollar terms, and may still be a valid rung on the ladder of decision making.