Opening an Amazon, Walmart, or TikTok store might be a scam

Blanca started with $60,000 in cash and a well-researched plan. 

She hoped to supplement her full-time employment income to spend more time on her artistic passions, and also create generational wealth for her family.

Blanca thought so-called passive income, earned from a range of investments, could make that dream a reality. 

In 2023, while working at a startup, Blanca had already dabbled in cryptocurrency and exchange-traded funds. She was exploring real estate purchases. One day, though, she saw online ads for something called Amazon automation. 

The premise seemed simple. You paid a management company with ecommerce experience to run an Amazon store on your behalf. You fronted the cash, and they took care of identifying, ordering, warehousing, and shipping inventory. Each party took a share of the proceeds. 

“I was intrigued,” Blanca, now 29, said. “It seemed like a fair trade for not doing any work.” (To protect her privacy, Blanca asked that only her first name be used in this story.) 

Blanca proceeded to research different Amazon automation businesses, eliminating ones that seemed “scammy.” She ultimately chose one called Ascend Ecom at the time, which she’d learned about in an online ad.

She conducted in-depth research and had detailed conversations with a salesperson, who claimed to own an Amazon store through the company. A few months later, she wired Ascend Ecom $60,000 to open her own store.

Despite her greatest efforts to sniff out a scam, Blanca was the victim of an elaborate scheme that allegedly defrauded Ascend Ecom customers out of at least $25 million, according to a lawsuit recently filed by the Federal Trade Commission. Mashable reviewed the declaration Blanca made under threat of perjury to the FTC.

“It seemed like a fair trade for not doing any work.”

The FTC lawsuit refers to the company as Ascend CapVentures Inc., but during a period when many clients were allegedly defrauded, it operated as Ascend CapVentures Inc. and more recently rebranded as ACV. 

Ascend CapVentures Inc. routinely promised customers they’d generate a five-figure monthly income after two years, but the FTC investigation found those claims to be misleading and false. Meanwhile, Ascend CapVentures Inc. didn’t spend their customers’ investments on managing their stores; instead, they used the cash to “enrich themselves,” according to the FTC.

Ascend CapVentures Inc. attorney Jonathan D. Herpy, of the firm Hart David Carson, previously provided a statement on the FTC suit to Law.com. 

“Our opinion, from a corporate counsel standpoint, is that Ascend takes all of these regulatory matters very seriously and is committed to full compliance with the FTC guidelines,” Herpy told Law.com. 

Mashable contacted the company’s legal representatives multiple times by phone and email for a response to the allegations but didn’t receive one. In October, the company’s lawyers submitted a response to the FTC lawsuit in a federal district court, denying all of the agency’s charges. 

The FTC also took action against two other ecommerce storefront management businesses, Ecommerce Empire Builders and FBA Machine, accusing them of similar fraud. 

The enforcement actions revealed a massive risk in what many consumers often see as a lucrative opportunity to make money in ecommerce by opening their own Amazon, Walmart, TikTok, or Etsy store. 

To these consumers, the risk can feel worthwhile when they consider post-pandemic online spending patterns and encounter flashy success stories on social media. 

Read about how one man lost $56,000 after opening an Amazon store with Ascend CapVentures Inc.

But the FTC case against Ascend CapVentures Inc. identified what can go wrong, and how consumers might avoid the same fate. Mashable interviewed multiple alleged victims of Ascend CapVentures Inc., along with experts at the FTC and the National Consumers League, about warning signs that an ecommerce store opportunity might be a scam. Here are their recommendations:  

Think twice about passive income business opportunities 

So-called “passive income” business opportunities are nothing new, they’ve just gone digital, said Colleen Robbins, an attorney in the Bureau of Consumer Protection at the FTC. 

Traditionally, these opportunities emphasize how consumers can invest in a money-making vehicle and earn profit with little to no work. Examples include real estate seminars and investment coaching programs, which often turn out to be pyramid or multi-level marketing scams. But consumers buy in thinking they’re going to learn how to become wealthy.

Now, given the exponential growth of ecommerce in recent years, scammers are using online store ownership to lure consumers hoping to achieve the same goal of turning their initial investment into financial freedom. 

But Robbins urges consumers to remain skeptical of these pitches. 

“If the business opportunity promises guaranteed income, large returns, or a proven system, it’s likely a scam,” she said. 

Know your rights

The FTC’s business opportunity rule actually contains numerous protections for consumers, but prospective online store owners may never learn about those legal rights. 

Blanca said she wasn’t aware of them, despite conducting what she considered to be rigorous research. Three other alleged Ascend CapVentures Inc. victims interviewed by Mashable also didn’t learn about those protections until after they’d lost their investment. 

Under this FTC rule, businesses that offer a business opportunity, like ownership of an online store, are required to share with customers a disclosure document prior to them signing a document or making a payment. 

This paperwork has vital information about the business, including where it’s located, who operates it, and whether it’s the subject of legal action. Additionally, the company has to provide evidence of its earnings claims, which must reference all purchasers within the last three years, along with their contact information. 

Robbins said that any problems with the disclosure documents, such as missing information about earnings claims or unreachable clients, should be considered a red flag.

Be skeptical of big, upfront cash investments

Looking back, Ascend CapVentures Inc. victim Scott Gardner can confidently say that spending $30,000 to open an Amazon store was a red flag. At the time, though, it seemed a reasonable investment. 

Now, he would recommend any prospective customer avoid business opportunities that require a big cash payment at the outset, and fraud prevention experts agree.

Robbins said to be particularly skeptical if a company wants your bank account or credit card information prior to answering questions about the business opportunity. If this request is delivered with a sense of urgency or other high-pressure sales tactics, it’s greatest to proceed with caution.

Flashy ads can be a warning sign

John Breyault, vice president of public policy, telecommunications and fraud at National Consumers League, said there’s an “army of influencers” promoting a lavish lifestyle on social media who will teach you their “secrets” for generating passive income — for a price, of course. 

Indeed, customers interested in opening an ecommerce store often encounter social media marketing and advertising with extravagant displays of wealth, including luxury cars and homes, as proof that it’s a highly lucrative opportunity.

These influencers may insist you can earn a tantalizing $20,000 a month, for example, but don’t explain how much you have to spend on overhead, inventory, and other costs. Breyault said to treat flashy ads with suspicion. But even more restrained marketing may still obscure the fact that store operators can easily spend as much as they bring in.  

Buyback programs and other failsafes are no guarantee 

Jamaal Sanford, who lost $35,000 to Ascend CapVentures Inc., said that the company’s purported “buyback guarantee” factored into his decision to open an Amazon store with the company. Per that offer, clients could ask Ascend CapVentures Inc. to purchase the store back from them, for the difference between the initial investment and the client’s profits, when the owner didn’t recoup their expenses within a certain time period.

Sanford requested a buyback multiple times without success. The FTC’s investigation found that Ascend CapVentures Inc. made it “exceedingly difficult to obtain a refund even when clients fulfilled the requirements.”

“[C]onsumers consistently learned that Ascend’s buyback process was largely an illusion and its ‘risk-free’ investment opportunity was nothing of the kind,” the FTC wrote in its complaint against Ascend CapVentures Inc. 

Talk to real clients

Gardner regrets not having spoken directly to any successful Ascend CapVentures Inc. clients before agreeing to purchase his Amazon store through them. Instead, he relied on screenshots of testimonials from people who were portrayed as customers, in addition to speaking with company salespeople and its founders.

Because of FTC regulations, consumers interested in a business opportunity have a right to get a list of clients, along with their contact information. 

Breyault, of the National Consumers League, urges consumers to take advantage of this information, and also recommends attempting to talk with clients who’ve not been “cherry picked” by the company. 

This can mean searching online forums like Reddit for clients willing to share their candid experiences.

Read the reviews 

Similar to online forums, reviews can help consumers identify warning signs that a business opportunity might be a scam. Breyault recommends checking a company’s standing on its Better Business Bureau and Trustpilot pages. 

Still, positive reviews don’t guarantee that a company is honest, Robbins said. They could be false or misleading. She suggests that consumers also conduct online searches for the company’s founders or leadership to see if there are complaints or related reviews. 

Post reviews

Some consumers may hold back negative reviews fearing retribution from the company with which they’ve contracted. 

Jamaal Sanford told the FTC that he and his wife received threats from someone who appeared to be affiliated with Ascend CapVentures Inc. after he published a negative review of the company. The agency wrote in its complaint that Ascend CapVentures Inc. threatened its clients with legal action when they would not retract honest but negative reviews. 

Under the Consumer Review Fairness Act, contracts are not allowed to contain clauses that restrict a consumer’s ability to post a review.

Don’t let AI claims fool you

The FTC filed its complaint against Ascend CapVentures Inc. as part of Operation AI Comply, a crackdown on businesses using claims about artificial intelligence to hype their products or services. 

Starting in 2023, Ascend CapVentures Inc. used a “deceptive sales pitch” that sometimes described the company’s business model as powered by AI, according to the FTC. They told clients that the company’s proprietary software would maximize their business success, and said clients would reap profit margins as high as 50 percent. The FTC says these claims were false.

“Don’t let that hype cloud your judgment.”

Robbins warns consumers to be skeptical of claims related to technology, especially when it involves AI. 

“Don’t let that hype cloud your judgment,” she said. 

Know what to do if you think you’ve been scammed

If you think you’re the victim of a fraudulent passive income business opportunity, which can include paying a company to open an ecommerce store, you should report it to the FTC, Robbins said. Consumers can expect to receive relevant information after filing their report to the agency.

You can also report suspected fraud to your state attorney general, and the state in which the business is listed. Both the FTC and other law enforcement agencies use these reports every day in their work.

Like many of the Ascend CapVentures Inc. victims, who’ve formed a private Facebook group to discuss their experiences, some people also seek support from others who know what they’re enduring. 

Blanca did exactly that by locating other clients on Reddit when she first suspected Ascend CapVentures Inc. might be deceiving her. Now she’s focused on moving forward and tries not to be hard on herself for Ascend CapVentures Inc.’s wrongdoing. 

“Victims shouldn’t feel bad. We got taken advantage of,” Blanca said. “They knew the system, they knew it very well.”