There’s a lot of buzz around Artificial Intelligence (AI) and its potential for advances in medicine, marketing, education, finance and many other aspects of our lives. On the flip side, Lina Khan, the Chair of the FTC, says it’s being used to “turbocharge” fraud and scams. She said regulators were behind the curve when the Internet expanded rapidly in the early 2000s and need to be vigilant earlier when it comes to AI being exploited for nefarious purposes.

The FTC is concerned that consumers will be mesmerized by such terms as “machine learning” and “neural networks” and fall prey to crooks who misrepresent or outright lie about how AI is used in their products. In August, it shut down a company that took in $22 million peddling a business opportunity that would show people how to “use AI or chatgpt tools” to consistently make $4-6,000 in monthly net profit.

The scammers formerly operated under the names Empire Commerce and Onyx Distribution, but changed to Automators AI. They claimed to be ecommerce experts and self-made millionaires who helped thousands of consumers make big bucks by running third-party stores on platforms like Amazon, Walmart and Facebook. They claimed that their system “integrates AI machine learning into the automation process, resulting in increased revenues and margins.” For an initial investment of as much as $125,000, consumers who bought into the program could sit back and collect a check every month while “our partners run an entire store for you.”

What did the FTC allege was really the case?

• The operators didn’t have the experience, expertise, and venture capital backing they claimed to have.
• Testimonials from “successful” investors were false.
• Many of the stores the company managed for investors were never activated and most of the ones that did open were suspended or terminated for violating Amazon’s and Walmart’s policies.
• The vast majority of clients didn’t even recoup their initial investment.

In bringing the action, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, said, “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’s advice to promoters of business opportunities includes ensuring they comply with its Business Opportunity Rule and substantiate all claims about earnings.  Regarding AI, it warns businesses against:

• Exaggerating what an AI product can do, falsely claiming it does something better than a non-AI product, or labeling a product as AI-powered simply because an AI tool was used in its development.
• Making people think they’re communicating with a real person when it’s actually a machine.
• Misleading people about what they’re seeing, hearing or reading.

Randy Hutchinson is president and CEO of the Better Business Bureau of the Mid-South and can be reached at rhutchinson@bbbmidsouth.org