WASHINGTON, D.C. — The proprietors of a fraudulent operation that pledged to amplify profits for consumers’ e-commerce storefronts using artificial intelligence (AI) have agreed to relinquish millions in assets in a settlement with the Federal Trade Commission (FTC). This landmark case also imposes a lifetime ban on two of the owners and all associated businesses from selling business opportunities or coaching programs related to e-commerce stores.
In August 2023, the FTC initiated proceedings against Roman Cresto, John Cresto, Andrew Chapman, and several companies under their control, such as Automators AI, Empire Ecommerce, and Onyx Distribution. The FTC alleged that these individuals and businesses duped consumers with baseless claims of “passive investment income” from online stores allegedly powered by AI.
“These defendants enticed consumers to invest millions in online stores supposedly driven by artificial intelligence, making hollow promises of success and profitability through their coaching services,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “With today’s action, we are imposing a ban on their coaching services, prohibiting false claims, and ensuring that defrauded consumers receive redress.”
According to the FTC’s complaint, the defendants promised consumers high returns from profitable e-stores and offered to teach them how to successfully establish and run e-stores on platforms like Amazon and Walmart using a “proven system” and the capabilities of AI.
However, the FTC asserted that most of the defendants’ clients failed to realize the promised earnings or even recover their substantial investments. Instead, they suffered considerable financial losses. Moreover, Amazon and Walmart frequently suspended, blocked, or terminated the stores that the defendants operated for their clients due to repeated policy violations.
The settlement order stipulates several key requirements:
- A permanent ban on offering business opportunities or coaching for e-commerce platforms: Except for Chapman and his company, Pelenea Ventures, LLC, all defendants will be permanently prohibited from offering business opportunities or coaching services related to managing online marketplace e-commerce platforms.
- Prohibition on deceptive earnings claims: All defendants will be barred from making deceptive earnings claims and will need to provide evidence to support any future earnings claims.
- Prohibition on preventing negative reviews: All defendants will be barred from enforcing contract provisions that restrict customers from leaving negative reviews about their companies or including such clauses in future contracts.
- Turn over possessions: The defendants must surrender their claims to assets held by the case receiver, along with the contents of numerous bank and cryptocurrency accounts. These assets, valued at millions of dollars, will be used by the FTC to refund affected consumers.
The orders include a total monetary judgment of $21,765,902.65, which is partially suspended based on the defendants’ inability to pay the full amount. If it is found that the defendants misrepresented their financial status to the FTC, the full judgment would become immediately payable.
The Commission vote approving the stipulated final order was 3-0. The FTC filed the proposed order in the U.S. District Court for the Southern District of California.
This case represents a significant victory for consumer protection in the rapidly evolving digital marketplace. It sends a clear message to other potential fraudsters that deceptive practices will not be tolerated and underscores the FTC’s commitment to safeguarding consumers in the age of AI and e-commerce.
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