The rise of generative AI has birthed a new type of scam dubbed AI washing, which occurs when a company falsely claims that its products or services are powered by AI, or that they use AI in a way that is misleading. This can be done through marketing materials, website claims, or even product packaging.<\/p>\n
Fraudsters exploit the naivety of new and uninformed investors, peddling misleading claims and deceptive advertising to turn a quick profit.<\/p>\n
An example is the Federal Trade Commission lawsuit against Automators AI, formerly known as Empire Ecommerce LLC. In August 2023, a federal court temporarily halted the deceptive sale of business opportunities, purporting to leverage AI, which allegedly defrauded consumers of $22 million.<\/p>\n
Defendants Roman Cresto, John Cresto, and Andrew Chapman painted themselves as self-made millionaires, touting their expertise in scaling e-commerce stores using AI machine learning. Empire’s website promised substantial gains but turned out to be nothing but smoke and mirrors.<\/p>\n
The fraudulent narrative extended to Empire’s marketing materials, making lavish claims about client profits, which lured investments ranging from $10,000 to $125,000.<\/p>\n
The company failed to provide required disclosure documents, leaving many clients with substantial losses. Empire’s e-commerce stores were eventually suspended and terminated, while the business data mysteriously disappeared after a sale to a third party. Even after selling Empire, the trio resorted to the same tactics with Automators AI in January 2023, peddling AI-powered solutions.<\/p>\n