FTC sues AI company for alleged deceptive practices that left small businesses in debt

The Federal Trade Commission announced Monday it has sued Air AI. The FTC has asked a federal court to stop the company from using alleged deceptive claims about business growth, earnings potential and refund guarantees.

The FTC says the Delaware-based technology company made false promises that defrauded small business owners and entrepreneurs of millions of dollars. The agency said the company’s practices cost some of those entrepreneurs losses of up to $250,000 each.

“The FTC is focused on ensuring the promise of new technology isn’t misused as a means to mislead consumers,” said FTC Bureau of Consumer Protection Director Christopher Mufarrige.

The complaint is against Air AI Technologies, its owners Caleb Maddix, Ryan O’Donnell and Thomas Lancer, and five other companies. It alleges that since at least February 2023, the company and its owners deceptively marketed and sold business coaching materials and support, as well as an “Air AI Access Card,” which is a business support suite.

The complaint says Air AI advertised their “conversational AI” feature, claiming it can “replace human customer service representatives” and “make business owners significant sums of money.” In one example, the FTC said the company claimed consumers would earn back tens of thousands of dollars within days or months.

“Companies that market AI-related tools with false promises of unrealistic investment returns and guaranteed refunds harm hardworking small business owners and undermine legitimate business’s adoption of AI,” Mufarrige said.

The FTC said Air AI consumers often do not earn the promised profits or even recoup what they paid the company. The FTC also said the company misled customers about receiving full refunds if they failed to earn a certain amount. Instead, the agency said when customers asked for a refund, the company often delayed consumers and left them in the dark before cutting off all communication.

The FTC alleges the company engaged in a list of illegal activities, including falsely claiming purchasers of the Air AI Access Card or licenses are protected by a refund or buy-back guarantee, misrepresenting the “performance, efficacy, nature, or central characteristics of their services” and failing to give consumers required disclosure documents and earnings claims statements and failing to provide refunds when consumers met the refund policy requirements, which violates the business opportunity rule.

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