The e-commerce industry has witnessed a surge in popularity over the years, with more people turning to online platforms like Amazon and Walmart to sell their products. As a result, a new breed of consultants and agencies have emerged, offering to teach regular consumers and aspiring entrepreneurs the secrets to success in the e-commerce world. Often referred to as “coaches” or “gurus,” these consultants claim to have achieved phenomenal success themselves and promise to share their expertise in exchange for a hefty fee. However, recent cases of deception and fraud have shed light on the dark side of this burgeoning industry.
John and Roman Cresto, self-proclaimed e-commerce “experts,” amassed millions of dollars by selling themselves as gurus who could unlock the secret to selling success on Amazon and Walmart. They flaunted a lavish lifestyle on social media, featuring extravagant vacations and luxury cars, all in an attempt to create an image of success. However, federal regulators now allege that their success was built on falsehoods and deception.
The Federal Trade Commission (FTC) has been cracking down on deceptive e-commerce consultancies that prey on unsuspecting consumers and fledgling online businesses. These consultancies often promise to manage every aspect of automated online stores, from finding products to fulfilling orders, for a substantial fee. The Cresto brothers operated companies like Empire Ecommerce and charged consumers anywhere from $10,000 to $125,000 for the initial investment, along with additional funding for working capital.
According to the FTC, the Cresto brothers’ promises of success were nothing more than empty words. By June 2022, less than 10% of the stores managed by Empire generated any sales, and most of these stores were later suspended or terminated by Amazon and Walmart for policy violations. The complaint filed by the FTC alleges that the Cresto brothers took a significant cut of any profits made by their “partners'” e-commerce stores. Moreover, Empire’s false promotion of its Amazon businesses through affiliate marketing schemes led to numerous clients losing money, while the Cresto brothers raked in over $1.5 million in commission fees.
The suspensions and terminations left Empire’s clients in dire financial straits, as they were forced to pay for inventory using credit cards. Empire’s refusal to refund clients for tens of thousands of dollars only exacerbated their financial woes. In total, the Cresto brothers made over $22 million from their clients, according to the FTC.
Even after the downfall of Empire, the Cresto brothers continued their deceptive practices by establishing a new business called Automators AI. This new venture claimed to teach consumers how to leverage artificial intelligence (AI) to become successful online sellers, making over $10,000 per month in sales. They also promoted the use of popular AI chatbot ChatGPT to create customer service scripts. The FTC alleges that this scheme is ongoing and defrauding consumers of tens of thousands of dollars.
As their fraudulent activities came under scrutiny, the Cresto brothers sought to offload their businesses onto another unsuspecting operator. They approached a Florida businessman named Daniel Cohen, who alleges that he was deceived about the true state of the business and used as a scapegoat by the Cresto brothers. Cohen claims that the Crestos presented him with projections that painted a rosy picture of Empire’s strength and profitability, but he suspected that these figures were fabricated.
In November 2022, Cohen agreed to buy the Cresto brothers’ business, wiring them $100,000. However, he soon discovered a string of ongoing legal disputes and received numerous complaints from disgruntled clients. According to Cohen’s lawsuit, the Crestos had scammed him out of over $525,000.
The Cresto brothers’ alleged fraudulent activities not only affected their clients but also entangled others in their web of deception. Cohen found himself abandoned by the law firm Stubbs Alderton & Markiles, who initially agreed to represent him but later decided to side with the Cresto brothers.
The moral implications of these actions are stark, leaving many wondering how such deceitful practices can go unchecked for so long. The FTC’s crackdown on deceptive e-commerce consultancies is an important step towards protecting consumers and preventing further exploitation. However, more needs to be done to ensure that aspiring entrepreneurs have access to legitimate and trustworthy resources.
The case of the Cresto brothers is a cautionary tale that exposes the dark side of the e-commerce coaching industry. It serves as a reminder to be vigilant and critical when seeking guidance in the ever-evolving world of online business.
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