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.
Fraudsters exploit the naivety of new and uninformed investors, peddling misleading claims and deceptive advertising to turn a quick profit.
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.
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.
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.
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.
The sources for this piece include an article in ZDNET.