Promises of ‘passive income’ on Amazon led to death threats for negative online review, FTC says
Packages move along a conveyor belt at an Amazon Fulfillment center on Cyber Monday in Robbinsville, New Jersey, on Nov. 28, 2022.
Stephanie Keith | Bloomberg | Getty Images
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.
Lina Khan, Chair of the Federal Trade Commission (FTC), testifies before the House Appropriations Subcommittee at the Rayburn House Office Building on May 15, 2024 in Washington, DC.
Kevin Dietsch | Getty Images News | Getty Images
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 hundreds of 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.”
WATCH: How Amazon became 2023’s top apparel and footwear seller
Microsoft CEO Satya Nadella speaks during the Microsoft Build conference at Microsoft headquarters in Redmond, Washington, on May 21, 2024.
Jason Redmond | AFP | Getty Images
A half-century ago, childhood friends Bill Gates and Paul Allen started Microsoft from a strip mall in Albuquerque, New Mexico. Five decades and almost $3 trillion later, the company celebrates its 50th birthday on Friday from its sprawling campus in Redmond, Washington.
Now the second most valuable publicly traded company in the world, Microsoft has only had three CEOs in its history, and all of them are in attendance for the monumental event. One is current CEO Satya Nadella. The other two are Gates and Steve Ballmer, both among the 11 richest people in the world due to their Microsoft fortunes.
While Microsoft has mostly been on the ascent of late, with Nadella turning the company into a major power player in cloud computing and artificial intelligence, the birthday party lands at an awkward moment.
The company’s stock price has dropped for four consecutive months for the first time since 2009 and just suffered its steepest quarterly drop in three years. That was all before President Donald Trump’s announcement this week of sweeping tariffs, which sent the Nasdaq tumbling on Thursday and Microsoft down another 2.4%.
Cloud computing has been Microsoft’s main source of new revenue since Nadella took over from Ballmer as CEO in 2014. But the Azure cloud reported disappointing revenue in the latest quarter, a miss that finance chief Amy Hood attributed in January to power and space shortages and a sales posture that focused too much on AI. Hood said revenue growth in the current quarter will fall to 10% from 17% a year earlier
Nadella said management is refining sales incentives to maximize revenue from traditional workloads, while positioning the company to benefit from the ongoing AI boom.
“You would rather win the new than just protect the past,” Nadella told analysts on a conference call.
The past remains healthy. Microsoft still generates around one-fifth of its roughly $262 billion in annual revenue from productivity software, mostly from commercial clients. Windows makes up around 10% of sales.
Meanwhile, the company has used its massive cash pile to orchestrate its three largest acquisitions on record in a little over eight years, snapping up LinkedIn in late 2016, Nuance Communications in 2022 and Activision Blizzard in 2023, for a combined $121 billion.
“Microsoft has figured out how to stay ahead of the curve, and 50 years later, this is a company that can still be on the forefront of technology innovation,” said Soma Somasegar, a former Microsoft executive who now invests in startups at venture firm Madrona. “That’s a commendable place for the company to be in.”
When Somasegar gave up his corporate vice president position at Microsoft in 2015, the company was fresh off a $7.6 billion write-down from Ballmer’s ill-timed purchase of Nokia’s devices and services business.
Microsoft is now in a historic phase of investment. The company has built a $13.8 billion stake in OpenAI and last year spent almost $76 billion on capital expenditures and finance leases, up 83% from a year prior, partly to enable the use of AI models in the Azure cloud. In January, Nadella said Microsoft has $13 billion in annualized AI revenue, more even than OpenAI, which just closed a financing round valuing the company at $300 billion.
Microsoft’s spending spree has constrained free cash flow growth. Guggenheim analysts wrote in a note after the company’s earnings report in January, “You just have to believe in the future.”
Of the 35 Microsoft analysts tracked by FactSet, 32 recommend buying the stock, which has appreciated tenfold since Nadella became CEO. Azure has become a fearsome threat to Amazon Web Services, which pioneered the cloud market in the 2000s, and startups as well as enterprises are flocking to its cloud technology.
Winston Weinberg, CEO of legal AI startup Harvey, uses OpenAI models through Azure. Weinberg lauded Nadella’s focus on customers of all sizes.
“Satya has literally responded to emails within 15 minutes of us having a technical problem, and he’ll route it to the right person,” Weinberg said.
Still, technology is moving at an increasingly rapid pace and Microsoft’s ability to stay on top is far from guaranteed. Industry experts highlighted four key issues the company has to address as it pushes into its next half-century.
Microsoft didn’t respond to a request for comment.
Regulation
There’s some optimism that the Trump administration and a new head of the Federal Trade Commission will open up the door to the kinds of deal-making that proved very challenging during Joe Biden’s presidency, when Lina Khan headed the FTC.
But regulatory uncertainty remains.
It’s not a new risk for Microsoft. In 1995, the company paid a $46 million breakup fee to tax software maker Intuit after the Justice Department filed suit to block the proposed deal. Years later, the DOJ got Microsoft to revamp some of its practices after a landmark antitrust case.
Microsoft pushed through its largest acquisition ever, the $75 billion purchase of video game publisher Activision, during Biden’s term. But only after a protracted legal battle with the FTC.
At the very end of Biden’s time in office, the FTC opened an antitrust investigation on Microsoft. That probe is ongoing, Bloomberg reported in March.
Nadella has cultivated a relationship with Trump. In January, the two reportedly met for lunch at Trump’s Mar-a-Lago resort in Florida, alongside Tesla CEO Elon Musk.
President Donald Trump shakes hands with Microsoft CEO Satya Nadella during an American Technology Council roundtable at the White House in Washington on June 19, 2017.
Nicholas Kamm | AFP | Getty Images
The U.S. isn’t the only concern. The U.K.’s Competition and Markets Authority said in January that an independent inquiry found that “Microsoft is using its strong position in software to make it harder for AWS and Google to compete effectively for cloud customers that wish to use Microsoft software on the cloud.”
Microsoft last year committed to unbundling Teams from Microsoft 365 productivity software subscriptions globally to address concerns from the European Union’s executive arm, the European Commission.
Noncore markets
Fairly early in Microsoft’s history the company became the world’s largest software maker. And in cloud, Microsoft is the biggest challenger to AWS. Most of the company’s revenue comes from corporations, schools and governments.
But Microsoft is in other markets where its position is weaker. Those include video games, laptops and search advertising.
Mary Jo Foley, editor in chief at advisory group Directions on Microsoft, said the company may be better off focusing on what it does best, rather than continuing to offer Xbox consoles and Surface tablets.
“Microsoft is not good at anything in the consumer space (with the possible exception of gaming),” wrote Foley, who has covered the company on and off since 1984. “You’re wasting time and money on trying to figure it out. Microsoft is an enterprise company — and that is more than OK.”
It’s unlikely Microsoft will back away from games, particularly after the Activision deal. Nearly $12 billion of Microsoft’s $69.6 billion in fourth-quarter revenue came from gaming, search and news advertising, and consumer subscriptions to the Microsoft 365 productivity bundle. That doesn’t include sales of devices, Windows licenses or advertising on LinkedIn.
“As a company, Microsoft’s all-in on gaming,” Nadella said in 2021 in an appearance alongside gaming unit head Phil Spencer. “We believe we can play a leading role in democratizing gaming and defining that future of interactive entertainment, quite frankly, at scale.”
AI pressure
Microsoft has an unquestionably strong position in AI today, thanks in no small part to its early alliance with OpenAI. Microsoft has added the startup’s AI models to Windows, Excel, Bing and other products.
The breakout has been GitHub Copilot, which generates source code and answers developers’ questions. GitHub reached $2 billion in annualized revenue last year, with Copilot accounting for more than 40% of sales growth for the business. Microsoft bought GitHub in 2018 for $7.5 billion.
Microsoft CEO Satya Nadella, right, speaks as OpenAI CEO Sam Altman looks on during the OpenAI DevDay event in San Francisco on Nov. 6, 2023.
Justin Sullivan | Getty Images
But speedy deployment in AI can be worrisome.
The company is “not providing the underpinnings needed to deploy AI properly, in terms of security and governance — all because they care more about being ‘first,'” Foley wrote. Microsoft also hasn’t been great at helping customers understand the return on investment, she wrote.
AI-ready Copilot+ PCs, which Microsoft introduced last year, aren’t gaining much traction. The company had to delay the release of the Recall search feature to prevent data breaches. And the Copilot assistant subscription, at $30 a month for customers of the Microsoft 365 productivity suite, hasn’t become pervasive in the business world.
“Copilot was really their chance to take the lead,” said Jason Wong, an analyst at technology industry researcher Gartner. “But increasingly, what it’s seeming like is Copilot is just an add-on and not like a net-new thing to drive AI.”
Innovation
At 50, the biggest question facing Microsoft is whether it can still build impressive technology on its own. Products like the Surface and HoloLens augmented reality headset generated buzz, but they hit the market years ago.
Teams was a novel addition to its software bundle, though the app’s success came during the Covid pandemic after the explosive growth in products like Zoom and Slack, which Salesforce acquired. And Microsoft is still researching quantum computing.
In AI, Microsoft’s best bet so far was its investment in OpenAI. Somasegar said Microsoft is in prime position to be a big player in the market.
“To me, it’s been 2½ years since ChatGPT showed up, and we are not even at the Uber and Airbnb moment,” Somasegar said. “There is a tremendous amount of value creation that needs to happen in AI. Microsoft as much as everybody else is thinking, ‘What does that mean? How do we get there?'”
Technology
Nvidia positioned to weather Trump tariffs, chip demand ‘off the charts,’ says Altimeter’s Gerstner
Altimeter Capital CEO Brad Gerstner said Thursday that he’s moving out of the “bomb shelter” with Nvidia and into a position of safety, expecting that the chipmaker is positioned to withstand President Donald Trump’s widespread tariffs.
“The growth and the demand for GPUs is off the charts,” he told CNBC’s “Fast Money Halftime Report,” referring to Nvidia’s graphics processing units that are powering the artificial intelligence boom. He said investors just need to listen to commentary from OpenAI, Google and Elon Musk.
President Trump announced an expansive and aggressive “reciprocal tariff” policy in a ceremony at the White House on Wednesday. The plan established a 10% baseline tariff, though many countries like China, Vietnam and Taiwan are subject to steeper rates. The announcement sent stocks tumbling on Thursday, with the tech-heavy Nasdaq down more than 5%, headed for its worst day since 2022.
The big reason Nvidia may be better positioned to withstand Trump’s tariff hikes is because semiconductors are on the list of exceptions, which Gerstner called a “wise exception” due to the importance of AI.
Nvidia’s business has exploded since the release of OpenAI’s ChatGPT in 2022, and annual revenue has more than doubled in each of the past two fiscal years. After a massive rally, Nvidia’s stock price has dropped by more than 20% this year and was down almost 7% on Thursday.
Gerstner is concerned about the potential of a recession due to the tariffs, but is relatively bullish on Nvidia, and said the “negative impact from tariffs will be much less than in other areas.”
He said it’s key for the U.S. to stay competitive in AI. And while the company’s chips are designed domestically, they’re manufactured in Taiwan “because they can’t be fabricated in the U.S.” Higher tariffs would punish companies like Meta and Microsoft, he said.
“We’re in a global race in AI,” Gerstner said. “We can’t hamper our ability to win that race.”
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