John and Roman Christo have made millions of dollars selling themselves as e-commerce “experts” who can teach ordinary consumers and investors the secret to successful selling online. Amazon And Walmartfor the price.
They’ve been distributing lavish vacations and luxury cars across their social media accounts, creating an image of success with the multimillion-dollar that federal regulators have drawn. Say now It was fueled by lies and deceit.
This case is the most recent example of the Federal Trade Commission Choking on deceptive e-commerce advice targeting consumers and online startups. A robust industry of advisors and agencies, often referred to as “coaches” or “teachers”, has emerged as retailers move increasingly online and marketplaces thrive on sites such as Amazon and Walmart. These instructors often claim to be highly successful in e-commerce and will impart their expertise to users who pay for expensive courses with no guarantee of success.
The Federal Trade Commission (FTC) on Tuesday asked a judge to temporarily ban the Christo brothers from doing business, in connection with a lawsuit before the agency. Submitted earlier this month In the US District Court for the Southern District of California.
The complaint says the Christo brothers “promised to expertly manage automated online store operations” on both Amazon and Walmart through their companies, including Empire Ecommerce, doing everything from product research to order fulfillment. The FTC claimed it charged consumers $10,000 to $125,000 for an initial investment, and $15,000 to $80,000 in additional financing as working capital.
The complaint says the Christo brothers also took 35% of any profits from their “partners'” e-commerce stores. By June 2022, less than 10% of empire-run stores generated sales, the Federal Trade Commission alleged. By October 2022, Amazon had suspended or terminated most of these stores for violating their intellectual property policies and a modus operandi called dropshipping, in which companies never own the inventory they sell, and instead order products through the manufacturer after the shopper. The complaint says: he makes the purchase. The majority of Walmart’s Empire storefronts were either never activated or terminated due to policy violations, according to the Federal Trade Commission (FTC).
Despite the suspensions, Empire continued for years to falsely promote the success of its Amazon business by enlisting affiliate marketers to post flashy videos online claiming to have generated “significant passive income” through Empire’s automation services. Empire managed to attract more than 60 new clients through this affiliate marketing scheme and generated more than $1.5 million in commission fees, the Federal Trade Commission alleged.
“In fact, most of Empire’s clients lost money and almost none of them paid the advertised amounts,” the agency wrote in its complaint.
The FTC alleged that the suspensions left Empire’s customers deeply in debt, “because Empire usually pays its customers for inventory on credit cards”. The FTC alleged that Empire refused to return to the victims tens of thousands of dollars paid by the victims to Empire or for merchandise sold.
The FTC alleged that the brothers took more than $22 million from their clients.
The millions that the Christos family has remitted themselves have been spent on luxury cars, vacations and even a lavish wedding in Italy, according to the Federal Trade Commission’s complaint and social media posts.
At the beginning of this year, after selling Empire, the Crestos created a new company called Automators AI, which claims to teach consumers how to use artificial intelligence to become online sellers who make over $10,000 in sales per month, using the famous AI. Chatbot ChatGPT was claimed by the Federal Trade Commission for creating customer service scripts. The scheme is ongoing and defrauding consumers of tens of thousands of dollars, according to the Federal Trade Commission.
Amazon and Walmart did not immediately respond to CNBC’s requests for comment.
As time went on with Empire’s alleged fraudulent behavior, the Cristo brothers attempted to mortgage their business to another operator, Daniel Cohen.
Cohen is now suing the Christos family, claiming they deceived him about the true state of the business and used him to deflect blame from themselves.
In October 2022 — the same month that the Federal Trade Commission alleged that most Amazon stores operating in Empire had been suspended — the Christo brothers approached Cohen, a Florida businessman, about buying their empire. Roman Christo showed projections that his business was very solid and profitable.
Cohen told CNBC in an interview that Christos’ family first messaged him via Instagram and that they met via Zoom later that month. Jon Christo assured Cohen on a Zoom meeting that Empire wasn’t facing any lawsuits or major concerns, aside from a “couple” of dissatisfied clients.
“I asked them to, because I know the industry,” Cohen told CNBC. Christos’ family has also shown him projections claiming that the Empire has collected up to 50% of the profits from the thousands of stores it supposedly runs.
“I’m not sure where they got their predictions from,” Cohen told CNBC. “Maybe at some point they had a store that was doing really well, and they might have used that score for everyone, but I think most of it was probably made up.”
Cohen agreed to buy the Christos family business on November 7, 2022, and transferred $100,000 to them the next day. Two days later, the Christos revealed five ongoing “legal disputes” being handled by their defense firm, Stubbs Alderton & Markiles.
“I paid a total of 490,000 Romanian for 6 stores…between LLC setups/fees, credit card top-ups, virtual store fees, their programs on so many programs they told me would push my stores to the top, etc, etc. That said, they cheated me out of over $525,000 in total,” read one of the emails from a client, according to the lawsuit filed by Cohen.
Dozens of other complaints were in the inbox, detailing alleged negligence or “shady” dealings by the Christo brothers.
“I paid you guys $65,000 for an experienced shop. Since starting my shop hasn’t done anywhere near expectations. Now my shop has stopped making any sales at all. I need to know why that was and what happened.”I’m starting to feel like I’ve been scammed And I need to get my attorney involved,” read another email cited in Cohen’s lawsuit.
Cohen also told CNBC that Stubbs Alderton & Markiles had agreed to act as his law firm, before firing him as a client and telling Cohen they would now represent the Christo brothers.
“From an ethical perspective. It doesn’t smell good,” Cohen’s current attorney, Nima TahmasibiHe told CNBC.
Attorneys for Stubbs Alderton & Markiles did not respond to CNBC’s inquiries about their handling of the cases. The Christo brothers did not respond to CNBC’s request for comment.