• The Federal Trade Commission is cracking down on "automation" companies that launch and manage online businesses on behalf of customers in exchange for an upfront investment.
• The latest case targets Ascend Ecom, which ran an e-commerce money-making scheme, primarily on Amazon.
• The FTC has accused companies like Ascend of misrepresenting themselves and making deceptive earnings claims.

Jamaal Sanford received a disturbing email in May of last year. The message, whose sender claimed to be part of a "Russian shadow team," contained Sanford's home address, social security number and his daughter's college. It came with a very specific threat.

The sender said Sanford, who lives in Springfield, Missouri, would only only be safe if he removed a negative online review.

"Do not play tough guy," the email said. "You have nothing to gain by keeping the reviews and EVERYTHING to lose by not cooperating."

Months earlier, Sanford had left a scathing review for an e-commerce "automation" company called Ascend Ecom on the rating site Trustpilot. Ascend's purported business was the launching and managing of Amazon storefronts on behalf of clients, who would pay money for the service and the promise of earning thousands of dollars in "passive income."

Sanford had invested $35,000 in such a scheme. He never recouped the money and is now in debt, according to a Federal Trade Commission lawsuit unsealed on Friday.

His experience is a key piece of the FTC's suit, which accuses Ascend of breaking federal laws by making false claims related to earnings and business performance, and threatening or penalizing customers for posting honest reviews, among other violations. The FTC is seeking monetary relief for Ascend customers and to prevent Ascend from doing business permanently.

It's the latest sign of the FTC's crackdown on e-commerce money-making schemes on top of some of the internet's leading marketplaces, like Amazon and Airbnb. Since mid-2023, the agency has sued at least four automation companies, alleging deceptive marketing practices and falsely telling customers that they could generate passive income.

The FTC isn't just focused on e-commerce automation businesses. On Wednesday, the agency said it's stepping up enforcement against companies that use artificial intelligence "as a way to supercharge deceptive or unfair conduct that harms consumers." The agency pointed to Ascend as a company that it took action against in part because of its claims that it used AI "to maximize clients' business success."

The FTC has also pledged to go after companies that try to suppress negative reviews online as part of new rules issued this year targeting fake reviews.

Automation businesses like Ascend promote their easy money opportunities on Instagram, TikTok and YouTube. But their promises go mostly unfulfilled, and often the storefronts get shut down for violating policies around dropshipping — the selling of products to customers without ever stocking inventory — or counterfeits.

The FTC's complaint against Ascend accused co-founders Will Basta and Jeremy Leung of defrauding consumers of at least $25 million through their scheme. Formed in 2021, Ascend has done business under several entity names with operations registered in states including Texas, Wyoming and California.

The filing shows that the threats against Sanford grew more menacing. Two days after the initial email, Sanford's wife's phone lit up with a text message containing an image of a severed head that again urged the removal of the unflattering review.

"Your husband has angered some people with his ignorance," the text message said. "The type he does not wish to anger."

Sanford soon purchased a security system for his home.

Sanford said in an interview that Ascend had promised his Amazon storefront would generate enough revenue to cover the cost of inventory the company bought each month on his behalf. Months went by and his store amassed a "smorgasbord" of items, from LED lights to vitamins, which Ascend purchased from other retailers like Macy's and Home Depot and then sold on Amazon, Sanford said. The company used the dropshipping model, Sanford said, which often led to the stores getting suspended on Amazon.

Amazon prohibits merchants from dropshipping unless they identify themselves as the seller of record, meaning their name is listed on the invoice, packing slip and other materials.

'Depleted bank accounts'

As Sanford's sales sputtered and his debts swelled, he made a series of complaints to Basta and Leung. When they went unanswered, he left the negative reviews. Sanford said Ascend eventually offered to refund him $20,000 if he would take down the review, but he declined.

"I think I'm resigned to the fact that I won't be getting my money back and now I just want accountability," he said.

Karl Kronenberger, a lawyer for Ascend, said in a statement that the company denies ever threatening customers and it attempted to resolve any disputes "in good faith."

"We are investigating whether a competitor of Ascend may be the driving force behind some of the allegations in the case," Kronenberger said.

Ascend's marketing pitch claimed customers could quickly earn thousands of dollars from sales generated on Amazon, Walmart and other platforms. The company said it had developed proprietary artificial intelligence tools that it used to identify top-selling products.

E-commerce automation companies are increasingly exploiting Amazon's third-party marketplace, which now hosts millions of merchants and accounts for more than half of all goods sold on the site.

Amazon didn't provide a comment for this story.

Ascend promoted the scheme as "risk free," the FTC said, because of its buyback guarantee, which effectively committed to make clients whole if they didn't recoup their investment within 36 months.

"After consumers invest, the promised gains never materialize, and consumers are left with depleted bank accounts and hefty credit card bills," the regulator wrote in its complaint.

To add an air of legitimacy, Ascend falsely claimed it had been featured in media outlets like Forbes, Yahoo! Finance and Business Insider, the FTC said. It primarily advertised its business on social media platforms TikTok, X, YouTube and Instagram.

Ascend faces two lawsuits in California that allege breach of contract and other claims, according to the FTC. In January, an arbitration action was filed against Ascend in Florida on behalf of 30 customers. Nima Tahmassebi, an attorney representing the Ascend customers, told CNBC that the clients chose to withdraw the claim once they learned of the FTC case.

Tahmassebi said he has been contacted by more than 100 individuals who "all but begged for legal assistance" because they lost money after paying for Ascend's automation services.

"I'm talking to people who said I can't get Christmas gifts this year because of my situation with them," Tahmassebi said. "People took money they could have applied to their kid's college tuition. Now it's gone, and they're left bewildered."

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