Lake Como in Lombardy, northern Italy.
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John and Roman Crest made millions of dollars selling themselves as e-commerce “experts” who could teach ordinary consumers and investors the secrets of e-commerce success. Amazon and walmartfor the price.
They littered their social media accounts with lavish vacations and luxury cars, creating the image of multi-million dollar success that federal regulators expect. say now Fueled by falsehood and deception.
This case is the Federal Trade Commission’s latest example crack down Deceptive e-commerce consulting firms targeting consumers and emerging online businesses. As more retailers move online and marketplaces on sites like Amazon and Walmart flourish, a robust industry of consultants and agents, often referred to as “coaches” and “guru,” is emerging. These coaches often claim to have had great success in e-commerce and pass on their expertise to users who have paid for expensive courses with no guarantee of success.
The FTC on Tuesday asked a judge to temporarily block the Crest brothers’ dealings in connection with the agency’s lawsuit. Submitted earlier this month in the United States District Court for the Southern District of California.
According to the complaint, the Crest brothers, through both companies, including Empire E-Commerce, “expertly manage automated online store operations” at both Amazon and Walmart, performing everything from product searches to order fulfillment. promised. The FTC claims that they charged consumers with an initial investment of $10,000 to $125,000 and additional funds of $15,000 to $80,000 for working capital.
The Crest brothers also received 35% of profits from their “partner” e-commerce store, according to the complaint. The FTC claimed that Empire-controlled stores had less than 10% of sales by June 2022. By October 2022, Amazon had suspended or closed most of these stores for violating its intellectual property policy and a business practice called dropshipping. Dropshipping is when a company doesn’t actually have inventory to sell, but instead orders the product from the manufacturer after the shopper. The complaint states that it was purchased. The majority of Empire stores in Walmart’s marketplace either never opened or were closed for policy violations, according to the FTC.
Despite the suspension, Empire has for years continued to bolster Amazon’s business by recruiting affiliate marketers who post flashy videos online claiming to have earned “large unearned income” through Empire’s automated services. Continued to mispromote success. Through this affiliate marketing scheme, Empire has allowed him to acquire more than 60 new customers, earning him more than $1.5 million in commissions, the FTC claimed.
“In fact, most of Empire’s clients lost money and virtually none earned the advertised sum,” the agency wrote in its complaint.
The FTC argued that the suspension left Empire’s customers heavily in debt because “Empire typically let customers pay for their inventory with credit cards.” Empire refused to refund tens of thousands of dollars the victim paid to Empire and the goods it sold, the FTC said.
The FTC claims the two brothers made more than $22 million from their clients.
The millions of dollars the Crests misappropriated for themselves were spent on luxury cars, vacations and even a lavish wedding in Italy, according to the FTC complaint and social media posts.
After selling Empire earlier this year, the Crests launched a new business called Autometers AI. The business will teach consumers how to use artificial intelligence, become an online seller earning “more than $10,000 a month,” and leverage popular AI. The FTC claimed to have created a customer service script using the chatbot ChatGPT. According to the FTC, the scheme is still underway, defrauding consumers of tens of thousands of dollars.
Amazon spokesman Curtis Eichelberger told CNBC in a statement that the company had investigated Crest’s scheme and supported the FTC lawsuit.
“Scams like this prey on would-be entrepreneurs and we remain vigilant to stop them,” Eichelberger said. “I encourage anyone interested in selling on Amazon to take advantage of the many free resources available. Amazon itself. “
Walmart did not immediately respond to CNBC’s request for comment.
dump sale exit
As time passed due to Empire’s alleged misconduct, the Cresto brothers tried to pawn their business to another owner, Daniel Cohen.
Mr. Cohen is now suing the Crests, accusing them of misleading him about the true state of the business and using him to avoid liability.
In October 2022 — the same month that the FTC claimed that most of Empire’s Amazon stores had been shut down — the Crest brothers approached Florida businessman Cohen about buying Empire. Roman Crest provided forecasts suggesting that his business is strong and profitable.
In an interview with CNBC, Cohen said the Crests first messaged via Instagram and met on Zoom later that month. Jon Crest assured Cohen during the Zoom meeting that Empire has not faced any lawsuits or serious concerns other than “a few” unhappy customers.
“I know the industry, so that’s what I asked them,” Cohen told CNBC. The Crests also provided him with estimates that the Empire is taking up to 50% of profits from thousands of stores it allegedly operates.
“I don’t know where they got that prediction from,” Cohen told CNBC. “Maybe there was a store that did well at some point and they just used the results for everyone, but I think most of it was probably a hoax.”
Cohen agreed to acquire Crestos’ business on November 7, 2022 and transfer $100,000 the next day. Two days later, the Krests disclosed five ongoing “legal disputes” being handled by the defense firm Stubbs, Alderton & Merkiles.
“I paid a total of ¥490,000 across 6 stores…LLC setup/fees, credit card feeds, virtual store fees, some software they told me would push my store to the top Between and so on, they scammed me for well over $525,000, according to Cohen’s lawsuit,” the customer said in an email.
Dozens more complaints lay dormant in the inbox, detailing alleged negligence and “shady” dealings by the Crest brothers.
“I paid $65,000 for an experienced store. Since I started my store, I’ve never met my plan. Now my store has no sales at all. Why is that?” I’m starting to feel like I’ve been scammed and I need to get my lawyers involved,” Cohen was quoted in the lawsuit. It was written in another e-mail.
Cohen also told CNBC that he fired Stubbs, Alderton & Markless as a client after he agreed to act as his law firm and will now represent the Crest brothers. said he told
Cohen’s current attorney said, “From a moral standpoint, it just doesn’t smell.” Nima Tamasebitold CNBC.
Attorneys for Stubbs, Alderton & Markiles did not respond to CNBC’s inquiries regarding the handling of the case. The Crest brothers did not respond to CNBC’s request for comment.
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