Jamaal Sanford obtained a disturbing e-mail in May of final yr. The message, whose sender claimed to be a part of a “Russian shadow workforce,” contained Sanford’s dwelling tackle, social safety quantity and his daughter’s faculty. It got here with a really particular menace.
The sender mentioned Sanford, who lives in Springfield, Missouri, would solely solely be secure if he eliminated a adverse on-line assessment.
“Do not play robust man,” the e-mail mentioned. “You don’t have anything to realize by maintaining the evaluations and EVERYTHING to lose by not cooperating.”
Months earlier, Sanford had left a scathing assessment for an e-commerce “automation” firm known as Ascend Ecom on the score web site Trustpilot. Ascend’s purported enterprise was the launching and managing of Amazon storefronts on behalf of shoppers, who would pay cash for the service and the promise of incomes 1000’s of {dollars} in “passive revenue.”
Sanford had invested $35,000 in such a scheme. He by no means recouped the cash and is now in debt, in line with a Federal Trade Commission lawsuit unsealed on Friday.
His expertise is a key piece of the FTC’s go well with, which accuses Ascend of breaking federal legal guidelines by making false claims associated to earnings and enterprise efficiency, and threatening or penalizing clients for posting trustworthy evaluations, amongst different violations. The FTC is searching for financial aid for Ascend clients and to forestall Ascend from doing enterprise completely.
It’s the most recent signal of the FTC’s crackdown on e-commerce money-making schemes on high of among the web’s main marketplaces, like Amazon and Airbnb. Since mid-2023, the company has sued not less than 4 automation corporations, alleging misleading advertising and marketing practices and falsely telling clients that they may generate passive revenue.
The FTC isn’t simply targeted on e-commerce automation companies. On Wednesday, the company mentioned it’s stepping up enforcement towards corporations that use synthetic intelligence “as a technique to supercharge misleading or unfair conduct that harms shoppers.” The company pointed to Ascend as an organization that it took motion towards partly due to its claims that it used AI “to maximise shoppers’ enterprise success.”
The FTC has additionally pledged to go after corporations that attempt to suppress adverse evaluations on-line as a part of new guidelines issued this yr focusing on pretend evaluations.
Automation companies like Ascend promote their straightforward cash alternatives on Instagram, TikTook and YouTube. But their guarantees go principally unfulfilled, and sometimes the storefronts get shut down for violating insurance policies round dropshipping — the promoting of merchandise to clients with out ever stocking stock — or counterfeits.
The FTC’s grievance towards Ascend accused co-founders Will Basta and Jeremy Leung of defrauding shoppers of not less than $25 million by means of their scheme. Formed in 2021, Ascend has completed enterprise beneath a number of entity names with operations registered in states together with Texas, Wyoming and California.
The submitting exhibits that the threats towards Sanford grew extra menacing. Two days after the preliminary e-mail, Sanford’s spouse’s telephone lit up with a textual content message containing a picture of a severed head that once more urged the removing of the unflattering assessment.
“Your husband has angered some folks along with his ignorance,” the textual content message mentioned. “The sort he doesn’t want to anger.”
Sanford quickly bought a safety system for his dwelling.
Sanford mentioned in an interview that Ascend had promised his Amazon storefront would generate sufficient income to cowl the price of stock the corporate purchased every month on his behalf. Months glided by and his retailer amassed a “smorgasbord” of things, from LED lights to nutritional vitamins, which Ascend bought from different retailers like Macy’s and Home Depot after which offered on Amazon, Sanford mentioned. The firm used the dropshipping mannequin, Sanford mentioned, which regularly led to the shops getting suspended on Amazon.
Amazon prohibits retailers from dropshipping until they establish themselves as the vendor of file, that means their identify is listed on the bill, packing slip and different supplies.
‘Depleted financial institution accounts’
As Sanford’s gross sales sputtered and his money owed swelled, he made a sequence of complaints to Basta and Leung. When they went unanswered, he left the adverse evaluations. Sanford mentioned Ascend ultimately supplied to refund him $20,000 if he would take down the assessment, however he declined.
“I feel I’m resigned to the truth that I gained’t be getting my a reimbursement and now I simply need accountability,” he mentioned.
Karl Kronenberger, a lawyer for Ascend, mentioned in an announcement that the corporate denies ever threatening clients and it tried to resolve any disputes “in good religion.”
“We are investigating whether or not a competitor of Ascend would be the driving power behind among the allegations within the case,” Kronenberger mentioned.
Ascend’s advertising and marketing pitch claimed clients might rapidly earn 1000’s of {dollars} from gross sales generated on Amazon, Walmart and different platforms. The firm mentioned it had developed proprietary synthetic intelligence instruments that it used to establish top-selling merchandise.
E-commerce automation corporations are more and more exploiting Amazon’s third-party market, which now hosts thousands and thousands of retailers and accounts for greater than half of all items offered on the positioning.
Amazon didn’t present a remark for this story.
Ascend promoted the scheme as “threat free,” the FTC mentioned, due to its buyback assure, which successfully dedicated to make shoppers complete in the event that they didn’t recoup their funding inside 36 months.
“After shoppers make investments, the promised positive aspects by no means materialize, and shoppers are left with depleted financial institution accounts and hefty bank card payments,” the regulator wrote in its grievance.
To add an air of legitimacy, Ascend falsely claimed it had been featured in media shops like Forbes, Yahoo! Finance and Business Insider, the FTC mentioned. It primarily marketed its enterprise on social media platforms TikTook, X, YouTube and Instagram.
Ascend faces two lawsuits in California that allege breach of contract and different claims, in line with the FTC. In January, an arbitration motion was filed towards Ascend in Florida on behalf of 30 clients. Nima Tahmassebi, an legal professional representing the Ascend clients, advised CNBC that the shoppers selected to withdraw the declare as soon as they realized of the FTC case.
Tahmassebi mentioned he has been contacted by greater than 100 people who “all however begged for authorized help” as a result of they misplaced cash after paying for Ascend’s automation companies.
“I’m speaking to individuals who mentioned I can’t get Christmas presents this yr due to my state of affairs with them,” Tahmassebi mentioned. “People took cash they may have utilized to their child’s faculty tuition. Now it’s gone, they usually’re left bewildered.”