TL;DR:
- FTC halts business scheme that misled consumers to invest $22 million in online stores with false promises of high earnings.
- Operators of Automators used unfounded claims of AI-powered success.
- Defendants also offered e-store setup guidance and claimed AI-backed profitability.
- Defendants’ false claims included fabricated success stories, exaggerated earnings projections, and endorsements.
- Artificial intelligence application alleged, but lacking substantial evidence.
- Consumer losses were incurred, defendants offered replacement storefronts and non-disparagement agreements.
- FTC complaint charges violations of FTC Act, Business Opportunity Rule, and Consumer Review Fairness Act.
- FTC aims for a permanent shutdown of the company’s operations.
- FTC’s resolute move underscores commitment to consumer protection.
Main AI News:
A recent decisive move by the Federal Trade Commission (FTC) has culminated in the temporary suspension of a business opportunity venture. The venture in question, operated under the name Automators, enticed consumers to invest a substantial sum of $22 million in online stores, under the guise of promised lucrative returns powered by unfounded assertions of income and profitability. Disturbingly, Automators additionally touted their utilization of artificial intelligence to assure triumph and prosperity for those who chose to partake in their investment endeavors.
Beyond the allure of high passive returns from profitable electronic stores, Automators, which has previously operated under the aliases Empire and Onyx Distribution, purported to impart the wisdom of creating and managing e-commerce stores to its customers. This instruction was promised through a supposedly ‘proven system’ bolstered by the capabilities of artificial intelligence.
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, shed light on the situation, stating, “The defendants preyed on consumers looking to provide for their families with promises of high returns and the use of AI to power such returns. Their lies caused consumers to lose tens of thousands of dollars, with many losing their life savings. The FTC is working to hold defendants accountable and to secure redress for their victims.”
The FTC’s complaint names Roman Cresto, John Cresto, and Andrew Chapman, and targets their associated enterprises: Automators AI, Empire Ecommerce, and Onyx Distribution. This legal action asserts that the vast majority of clients enticed by the defendants failed to realize the promised earnings, and many were unable to recover their initial investments. In a significant twist, numerous Amazon and Walmart stores operated by the defendants were subjected to repeated policy violations, ultimately leading to their suspension or termination.
The allegations within the complaint assert that the Crestos and Chapman engaged in multifarious deception. Their tactics included false claims concerning their own track record, lavish promises of success, endorsements, and the purported application of artificial intelligence. Notably, the defendants’ claims of using “AI machine learning” to optimize revenues and generate substantial sales were spotlighted, but these claims lacked substantial evidence.
Furthermore, the FTC’s legal document exposed false proclamations regarding venture capital backing for Empire. Allegedly supported by “venture capital,” Empire, in reality, had never received any investments from a venture capital entity.
Consumer complaints regarding significant losses flooded in, revealing a disturbing pattern. Rather than offering refunds, the defendants allegedly attempted to placate aggrieved parties by offering new online storefronts on alternative platforms. This endeavor was accompanied by the insistence that consumers sign non-disparagement agreements, effectively preventing them from expressing their grievances through reviews.
The FTC’s complaint asserts violations of key regulations, including the FTC Act, the Business Opportunity Rule, and the Consumer Review Fairness Act. The ultimate goal of the FTC is to seek a permanent cessation of the company’s operations, a decisive move in the interests of consumer protection.
With a unanimous 3-0 vote, the FTC initiated the complaint, which has been filed in the U.S. District Court for the Southern District of California. The court swiftly issued a temporary restraining order against the defendants on August 11, 2023. This resolute stance marks an integral stride toward upholding fairness, integrity, and transparency in the realm of business opportunities.
Conclusion:
This FTC action serves as a significant warning to the market, highlighting the severe consequences that await those who exploit deceptive tactics to attract investors. The case unveils the susceptibility of consumers to alluring promises and showcases the FTC’s dedication to ensuring transparency and fairness within the business opportunity landscape. As the regulatory landscape intensifies, businesses must prioritize integrity and accountability to thrive in an environment of heightened scrutiny.
