FTC Enforcement Sweep Targets ‘Fever Pitch’ of AI Scams

The Federal Trade Commission (FTC) announced five law enforcement actions that it said are part of a crackdown on deceptive artificial intelligence (AI) claims and schemes.

The law enforcement sweep, dubbed “Operation AI Comply,” targets companies that use “AI hype” or sell AI technology that can be used in deceptive and unfair ways, the regulator said in a Wednesday (Sept. 25) press release.

“Using AI tools to trick, mislead or defraud people is illegal,” FTC Chair Lina M. Khan said in the release. “The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books.”

One action targeted DoNotPay, a company that the FTC alleged said it offered “the world’s first robot lawyer” but did not test its capabilities or hire or retain any attorneys. DoNotPay agreed to a proposed settlement that would require it to pay $193,000, warn consumers who subscribed to the service about its limitations, and not make unsubstantiated claims about its ability to substitute for any professional service, according to the release.

Reached by PYMNTS, a DoNotPay spokeswoman provided an emailed statement saying: “DoNotPay is pleased to have worked constructively with the FTC to settle this case and fully resolve these issues, without admitting liability. The complaint relates to the usage of a few hundred customers some years ago (out of millions of people), with services that have long been discontinued.”

The FTC also filed a lawsuit against an online business opportunity scheme that has operated under many names, including Accelerated eCom Ventures, alleging that it falsely claimed its AI-powered tools would help consumers earn thousands of dollars a month by opening online storefronts. A federal court has put this scheme under the control of a receiver, and the FTC’s case against the scheme is ongoing.

Accelerated eCom Ventures did not immediately reply to PYMNTS’ request for comment.

A third action targeted Ecommerce Empire Builders, which the FTC alleges falsely claimed to help consumers build an AI-powered eCommerce business but failed to deliver the sort of income it promised in ads. A federal court has put this scheme under the control of a receiver, and the FTC’s case against the scheme is ongoing.

Ecommerce Empire Builders could not be reached for comment, as its website was offline.

The regulator also targeted Rytr, a firm that it alleges has marketed and sold an AI “writing assistant” that could write testimonials and reviews, among other things, but generated false and deceptive content for consumer reviews. A proposed order settling this complaint would bar the company from selling services dedicated to generating reviews.

Rytr did not immediately reply to PYMNTS’ request for comment.

The fifth law enforcement action announced Wednesday by the FTC focused on a business opportunity scheme called The FBA Machine that the regulator alleges falsely promised consumers the ability to make guaranteed income through AI-powered online storefronts. A federal court has put this scheme under the control of a receiver, and the FTC’s case against the scheme is ongoing.

The FBA Machine could not be reached for comment, as an email sent to the address on its website was returned as undeliverable.

Some experts say AI hype has reached a fever pitch, obscuring the reality of the technology’s current capabilities, PYMNTS reported in April. One of the main issues with this hype is that it creates unrealistic expectations among the public and investors.