UPDATE — AUGUST 2025: Since the Federal Trade Commission (FTC) launched “Operation AI Comply” in September 2024, the agency’s first major enforcement sweep targeting AI-related deception, several key cases have advanced through settlements, litigation, and compliance monitoring into 2025. The initiative showed that companies cannot use AI hype to mislead consumers — and the follow-up proves the FTC is enforcing that message with action.
In one of the most high-profile cases, DoNotPay, which marketed itself as the “world’s first robot lawyer,” finalized its settlement with the FTC in late 2024. The company agreed to pay $193,000, notify consumers about the limits of its AI tools, and stop making unsupported claims about replacing licensed attorneys. DoNotPay continues to operate in a reduced form under ongoing compliance monitoring.
Cases against Ascend Ecom and Ecommerce Empire Builders (EEB) — both of which promoted AI-powered online storefronts as paths to quick wealth — remain active in federal court. Court-appointed receivers now control both businesses, are recovering assets, and are reviewing redress claims from consumers. The FTC is pursuing permanent bans and restitution orders, though most investors are unlikely to recover what they lost.
The case against Rytr, an AI tool that generated fake consumer reviews, was finalized in early 2025. The FTC approved a settlement that prohibits the company from offering services creating reviews or testimonials without clear transparency rules. The case is closed but remains under compliance monitoring.
FBA Machine, another AI-driven ecommerce scheme accused of defrauding consumers out of more than $15 million, remains under a court-ordered halt. The FTC is pressing for summary judgment, with a final ruling expected later this year.
The FTC has since expanded the “AI Comply” initiative. Investigations now cover exaggerated claims in AI health technologies, deceptive financial services marketing, and deepfake scams — including AI-cloned voices used in fraud. The FTC’s mid-2025 rule on fake reviews and testimonials has strengthened the agency’s ability to combat AI-generated deception in commerce.
ORIGINAL NEWS STORY:
FTC Cracks Down on Deceptive AI Claims and Schemes with Operation AI Comply
On September 25, the Federal Trade Commission (FTC) launched “Operation AI Comply,” a national enforcement initiative aimed at companies misusing artificial intelligence (AI) for deceptive or unfair practices. The FTC announced five law enforcement actions against businesses that exploited AI hype to defraud consumers, marking a major step in protecting people from misleading AI-related claims.
“Using AI tools to trick, mislead, or defraud people is illegal,” said FTC Chair Lina M. Khan. “The FTC’s enforcement actions make clear that there is no AI exemption from the laws on the books. By cracking down on unfair or deceptive practices, the FTC is ensuring that honest businesses can compete fairly and consumers remain protected.”
DoNotPay Misrepresented Its “Robot Lawyer” Capabilities
Among the most notable cases was DoNotPay, which falsely advertised its AI service as “the world’s first robot lawyer.” The company claimed its technology could replace human lawyers and even file lawsuits or create valid legal documents in minutes. The FTC’s complaint revealed that DoNotPay failed to substantiate these claims and did not test whether its chatbot’s work matched that of licensed attorneys. The company also lacked any legal professionals on staff to support its claims. The FTC also determined that DoNotPay promoted another unproven service that claimed to scan business websites for law violations. As part of a settlement, the company agreed to pay $193,000 and alert consumers to its limitations. It must also stop making unsupported claims about replacing professional services.
FTC Sues AI-Driven E-Commerce Schemes
The FTC filed lawsuits against Ascend Ecom and Ecommerce Empire Builders (EEB), two business opportunity schemes that promised quick wealth through AI-powered online stores. Ascend Ecom, operated by William Basta and Kenneth Leung, allegedly defrauded consumers of more than $25 million by charging tens of thousands of dollars for online storefronts on platforms like Amazon and Etsy. The FTC reported that most investors never saw the promised profits. According to the complaint, Ascend Ecom’s operators pressured customers to remove negative reviews and failed to honor refund guarantees. A federal court issued an order halting the business and appointing a receiver to recover assets.
EEB, led by CEO Peter Prusinowski, promoted a training program and “done-for-you” ecommerce stores that it claimed could generate millions in income. Few consumers earned any revenue, and many refund requests were denied. Like Ascend Ecom, the company’s operations have been suspended under court order while the FTC’s case continues.
Fake Reviews and Deceptive AI Tools Under Scrutiny
In another action, the FTC targeted Rytr, an AI “writing assistant” that generated fake consumer reviews. Paid subscribers could produce detailed reviews with little input, flooding marketplaces with misleading content. The FTC alleged that this practice deceived consumers and hurt competitors. The proposed settlement bars Rytr from offering such services without clear transparency measures. The agency also continued its case against FBA Machine, an AI-based ecommerce scheme accused of defrauding consumers of over $15 million. A federal court has frozen its operations pending a final ruling.
FTC Emphasizes Continued Oversight of AI Claims
“Operation AI Comply” highlights the FTC’s growing focus on AI accountability. As companies increasingly use AI to market products, the agency aims to ensure claims remain truthful and evidence-based. The initiative reinforces the message that AI is not a loophole for deception — and that enforcement will continue as new risks emerge.
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