Generative AI is everything, everywhere, all at once

Businesses want in on generative AI and are willing to do anything to ride the wave.

Is generative AI here to stay? Most signs are pointing to yes. But in what capacity? That’s for tech developers and the industry at large to decide. Still, as Silicon Valley rides this wave, businesses big and small are grabbing a surfboard and catching ripples.

Some are building their own large language models for widespread use or baking generative AI into the ethos of their products. And others? Well, they’re just saying stuff, anything really, to cash in on the buzzword du jour.

But the advent of any new technology brings bad actors who see the ignorance of new, naive investors and the potential to turn a quick profit. That’s where AI washing comes into play — businesses are falsely advertising to consumers that a product or business includes AI when it actually doesn’t. Unassuming consumers will pay the price when AI washing goes mainstream.

To stay ahead of the AI scams, officials and tech experts weigh in about the warnings and red flags to watch out for. We delve into how consumers can protect themselves and how businesses can avoid exaggerating AI claims.

Not so intelligent, but definitely artificial

Take this recent Federal Trade Commission lawsuit, for example. In August, a federal court temporarily shut down a business scheme by Automators AI (formerly Empire Ecommerce LLC) for deceiving consumers through the sale of business opportunities that purportedly used AI.

Defendants Roman Cresto, John Cresto, and Andrew Chapman allegedly schemed consumers out of $22 million, violating the Business Opportunity Rule and the FTC Act.

Roman, John, and Chapman, the FTC lawsuit alleges, promoted themselves as self-made millionaires with expertise in scaling third-party e-commerce stores through client investment. Empire’s website claims to integrate AI machine learning into its automation process, boosting revenue and bolstering business success. But it was all smoke and mirrors.

Let’s begin with Empire’s marketing material. Empire’s ads, the lawsuit states, included “lavish” claims about the profit clients would make if they were to invest in the “automated” e-commerce packages, with initial investment costing between $10,000 and $125,000 and additional costs of $15,000 to $80,000.

The company failed to provide prospective customers with disclosure documents required under the FTC’s Business Opportunity Rule, according to the lawsuit. Most clients did not make back the promised income the company advertised and ended up losing their investments, the lawsuit states, and the e-commerce stores that Empire established and managed were suspended and eventually terminated for policy violations. Then, in November 2022, right before they sold Empire to a third-party purchaser, employees lost access to the business software systems, and John and Roman swept all data and email history from Empire’s records.

But the tomfoolery and scamming didn’t cease after the business was sold. In January 2023, the trio recycled the same marketing tactics to advertise their new venture, Automators AI. The business allegedly teaches consumers how to use AI to discover popular products on e-commerce sites and make over $10,000 in sales each month, as well as instructing consumers on how to use ChatGPT to create customer service scripts. In Automators’ social media ads, Roman creates a narrative as a rags-to-riches “leading eight-figure Amazon entrepreneur” and wealth-generation systems creator who dropped out of college at 20 and can now buy his mom a Tesla and travel around the world in his McLaren Spider sports car.

“[These scams] are not new… What is different this time is the content produced by AI can be so real,” Constellation Research VP and Principal Analyst Andy Thurai tells ZDNET. “The deep fakes and other synthetic content are almost real, it will be hard even for the experts to distinguish between real and fakes. It will be hard for the unsuspecting, uneducated, and untrained commoners.”

Buzzy like a bee

The last thing a business wants to be when a new technology emerges is left behind. But what a company or individual does to get ahead of this technology can lack vision and thematic integration at best and be misleading and fraudulent at worst.

In 2017, when Silicon Valley was set on bitcoin, Long Island Iced Tea Corp. — the company that, you guessed it, makes soft drinks — changed its name to Long Blockchain Corp., resulting in a 380% spike in its share price (that was due to insider trading, the Securities and Exchange Commission later discovered). Long Island Iced Tea Corp. jumped on the hype and told stakeholders that it would incorporate the technology into its operations, with no ties to the cryptocurrency nor expertise in anything besides iced tea.

Here’s another one: In 2015, the former associate dean and professor of MIT Sloan School of Business and his son, a Harvard Business School graduate, misled investors out of $500 million by falsely claiming that their hedge fund invested clients’ money through a “complex mathematical trading model,” essentially AI, developed by the former professor, according to the Department of Justice. The hedge fund did not. 

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