Where automated decisions went wrong

California regulator accuses Maxpread Technologies of using AI-generated fake CEO to scam investors

Maxpread Technologies allegedly used an AI-generated avatar to pose as its CEO in a YouTube video to deceive investors. The California DFPI issued cease and desist letters to Maxpread and four other companies for offering unqualified securities and making false promises. The regulator claims the companies promised high daily returns using AI trading, but these claims were false. Maxpread did not respond to requests for comment.

Company involved

Maxpread Technologies

8 source articles · read the reporting →

LoanDepot algorithm denied mortgage to Black couple in Charlotte

In August 2019, Crystal Marie and Eskias McDaniels, a Black couple, were denied a mortgage for a house in Charlotte, North Carolina, by loanDepot's automated underwriting algorithm. The algorithm rejected the application because Crystal Marie was a contractor, not a full-time employee, despite her high credit score and income. After the couple enlisted their real estate agent and employer to intervene, the lender reversed the decision and cleared them to close. The couple alleged that race played a role in the denial, which loanDepot denied.

Company involved

loanDepot

AI system involved

Classic FICO and Fannie Mae/Freddie Mac automated underwriting software

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UnitedHealthcare sued for using AI to deny Medicare Advantage patients care

A class action complaint alleges that UnitedHealthcare and its subsidiary naviHealth deployed an artificial intelligence model to override treating physicians' determinations of medically necessary care for elderly Medicare Advantage patients. The complaint claims the AI model has a known 90% error rate and wrongfully denied patients care. The lawsuit, filed in the U.S. District Court for the District of Minnesota, seeks damages on behalf of the estates of two deceased patients and all others similarly situated.

Company involved

UnitedHealthcare, Inc.

10 source articles · read the reporting →

Canadian news outlets sue OpenAI over alleged copyright infringement in training ChatGPT

A coalition of major Canadian news outlets, including the Toronto Star, Postmedia, and CBC, is suing OpenAI, alleging that the company illegally used their copyrighted articles to train its ChatGPT chatbot. The lawsuit, filed in Canada, seeks punitive damages and an injunction to stop OpenAI from using their content. OpenAI has defended its practices, stating that its models are trained on publicly available data and that it offers publishers ways to opt out.

Company involved

OpenAI

AI system involved

ChatGPT

6 source articles · read the reporting →

ScaleFactor reportedly failed to deliver promised automated bookkeeping software

ScaleFactor, an Austin-based startup, is reported to have failed to deliver the automated, real-time bookkeeping tools it promised customers, instead relying on human bookkeepers and a Filipino contract accounting firm. The company told Forbes in June that it was shutting down, initially blaming the pandemic, but Forbes later reported that its problems predated Covid-19. Investors reportedly came to see the company as more of a services business than a software platform, and pulled funding after a pivot to a marketplace model. No legal or regulatory action is reported.

Company involved

ScaleFactor

10 source articles · read the reporting →

UnitedHealth used ALERT algorithm to limit mental health coverage, regulators found

ProPublica reports that UnitedHealth Group's Optum subsidiary used the ALERT algorithm to flag mental health patients and therapists as outliers, leading to therapy coverage denials. Regulators in California, Massachusetts and New York alleged this breached the federal Mental Health Parity and Addiction Equity Act, and UnitedHealth agreed to restrict the system in those jurisdictions. The company denies wrongdoing and says its programmes are compliant. Affected patients, including Medicaid enrollees, were left to pay out-of-pocket or go without care.

Company involved

UnitedHealth Group

AI system involved

ALERT

5 source articles · read the reporting →

Good Daily operates AI-generated local news network without disclosure

Good Daily Inc., run by Matthew Henderson, operates hundreds of AI-generated local newsletters across the U.S. that aggregate and summarize news from local outlets. The newsletters use large language models without disclosing this to subscribers, and feature fabricated testimonials. Some readers reported being signed up without their consent. Local news outlets have criticized the network for not driving meaningful traffic and for undermining trust.

Company involved

Good Daily Inc.

AI system involved

Good Daily

3 source articles · read the reporting →

Presto Automation uses off-site human agents to double-check AI drive-thru orders

Presto Automation Inc, which markets an AI voice assistant for drive-thru ordering, used off-site human agents in countries including the Philippines to double-check orders in more than 70% of customer interactions, according to SEC filings reported by Bloomberg. The company told Bloomberg that the process helps train its system and should reduce human intervention over time. Presto's drive-thru AI is used in more than 400 restaurants, including Del Taco, Carl's Jr and Checkers, and its stock fell more than 10% after the reports.

Company involved

Presto Automation Inc.

8 source articles · read the reporting →

Two families file lawsuit against AI chatbot service - CBS News

The chatbot provided responses to children

Company involved

character.ai

AI system involved

character.ai

1 source article · read the reporting →

FTC settles with DoNotPay over deceptive AI lawyer claims

The FTC took action against DoNotPay, a company that claimed to offer an AI service that was 'the world's first robot lawyer.' The company promised to generate legal documents and replace human lawyers, but the FTC alleged it failed to test its AI output and did not hire any attorneys. DoNotPay agreed to a settlement requiring it to pay $193,000 and notify consumers about the limitations of its service.

Company involved

DoNotPay

AI system involved

DoNotPay

7 source articles · read the reporting →

EvenUp AI errors in personal injury demand letters lead to scrutiny

EvenUp, a legal tech startup valued at $1 billion, uses AI to draft personal injury demand letters. Former employees revealed that the AI system frequently makes errors, including missing injuries and fabricating medical conditions. The company defends its hybrid approach with human oversight, but critics allege overpromised AI capabilities.

Company involved

EvenUp

6 source articles · read the reporting →

Is Your AI Chatbot Snitching? A New Lawsuit Alleges This Company Shared Data With Tech Giants - inc.com

The AI chatbot shared user data with tech giants.

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Voice actors sue LOVO over alleged theft of voices for AI training

Voice actors Paul Skye Lehrman and Linnea Sage filed a proposed class action against AI startup LOVO, alleging the company misappropriated their voices to train its text-to-speech system Genny. The actors claim they were hired on Fiverr under the pretence of academic research but later discovered their voices were used commercially without consent. Lehrman reports a 50% decline in work and loss of control over how his voice is used. The lawsuit, filed in New York federal court, seeks to represent other affected voiceover artists and obtain a court order blocking the practice.

Company involved

LOVO

AI system involved

Genny

6 source articles · read the reporting →

AI-generated article misstates Roadzen's Q1 revenue expectations

An AI-generated article on The Motley Fool incorrectly stated that Roadzen's analyst expectations for Q1 revenue were over $21 million, implying a revenue miss of more than 50%. Roadzen clarified that these figures were never issued by its covering analysts and that its actual revenue of $10.9 million was in line with estimates. The Motley Fool later corrected the article and added an editor's note acknowledging the error.

Company involved

The Motley Fool

4 source articles · read the reporting →

Record labels sue AI music companies Suno and Udio for copyright infringement

Major record labels including Universal Music Group, Sony Music Entertainment, and Warner Records, represented by the RIAA, have filed lawsuits against AI music companies Suno and Udio. The lawsuits allege that the companies used copyrighted sound recordings without permission to train their generative AI models, which can produce songs that imitate known artists. The RIAA is seeking damages of up to $150,000 per work. The companies have denied the allegations, with Suno's CEO stating that their technology generates new outputs and does not allow prompts based on specific artists.

Company involved

Suno and Udio

AI system involved

Suno and Udio

10 source articles · read the reporting →

ChatGPT hallucinates fake links to news partners' investigations

Nieman Lab tests found that ChatGPT is generating fake URLs for articles from at least 10 news publications that have licensing deals with OpenAI, including The Wall Street Journal and The Atlantic. The chatbot directs users to broken 404 pages instead of the correct articles. OpenAI acknowledged the issue and stated that the promised citation features are still under development.

Company involved

OpenAI

AI system involved

ChatGPT

7 source articles · read the reporting →

Big Tech companies used YouTube videos to train AI without consent

Proof News found that subtitles from 173,536 YouTube videos were used by companies including Anthropic, Nvidia, Apple, and Salesforce to train AI models. The dataset, called YouTube Subtitles, was created by EleutherAI and published in 2020. Creators were not aware and some have expressed frustration, calling it theft. The companies have acknowledged using the dataset but argue it was publicly available.

Company involved

Anthropic, Nvidia, Apple, Salesforce, Bloomberg, Databricks

AI system involved

Claude, OpenELM

10 source articles · read the reporting →

FTC investigates OpenAI over ChatGPT data leak and inaccuracy

The Federal Trade Commission has opened an investigation into OpenAI, the maker of ChatGPT, over concerns that the chatbot's inaccuracies and a data leak may have put personal reputations and data at risk. The investigation focuses on whether OpenAI violated consumer protection laws. The company has not yet responded publicly to the investigation.

Company involved

OpenAI

AI system involved

ChatGPT

6 source articles · read the reporting →

Publishers sue AI startup Cohere over alleged copyright infringement

A consortium of 14 publishers including Condé Nast, The Atlantic, and Forbes filed a lawsuit against Cohere, alleging that the generative AI startup engaged in massive, systematic copyright infringement by using at least 4,000 copyrighted works to train its AI models and display large portions of articles, harming referral traffic. Cohere denied the allegations, calling the lawsuit misguided and frivolous.

Company involved

Cohere

AI system involved

Cohere's AI models

8 source articles · read the reporting →

Bots and short sellers spread misinformation to trigger First Republic Bank run

A report by Valent Technologies alleges that AI-powered bots and fake accounts spread misinformation about First Republic Bank in March 2023, coinciding with a $100 billion deposit withdrawal and the bank's collapse. The report suggests short sellers likely orchestrated the bots to drive down the share price. Federal regulators closed the bank and sold its assets to J.P. Morgan, and the bank's former CEO attributed the collapse to 'contamination' by anxiety.

2 source articles · read the reporting →

SEC charges YouPlus and CEO with defrauding investors

The SEC charged machine-learning startup YouPlus and its CEO Shaukat Shamim with defrauding investors. Shamim allegedly made false statements about the company's revenue and customer numbers, including providing falsified bank statements. The scheme unravelled when Shamim confessed to investors that the company had earned less than $500,000 and had only four paying customers since 2013. The SEC is seeking permanent injunctions, civil penalties, and an officer-and-director bar.

Company involved

YouPlus

AI system involved

YouPlus machine-learning tool

1 source article · read the reporting →

Zillow faces securities class action over Zillow Offers wind-down

Zillow Group, Inc. is accused of making false and misleading statements to investors about its Zillow Offers home-flipping business. The company allegedly failed to disclose that its forecasting algorithm was unable to predict home prices accurately, leading to a $304 million inventory write-down and a decision to wind down the business. Investors who bought shares between February 10 and November 2, 2021, suffered losses when the stock price dropped after the announcement. A class action lawsuit has been filed in Washington federal court.

Company involved

Zillow Group, Inc.

AI system involved

Zillow Offers

10 source articles · read the reporting →

Moonwell loses $1.78M after AI-generated code from Claude Opus 4.6 causes oracle pricing error

DeFi lending protocol Moonwell lost $1.78 million after an oracle pricing error in smart contract code partially written by Anthropic's Claude Opus 4.6 model. The error valued cbETH at approximately $1.12 per token instead of its actual market price of nearly $2,200, triggering instant liquidations. Moonwell contained the issue by reducing the cbETH borrow cap, but users suffered catastrophic losses. The incident has sparked debate about the risks of AI-generated code in smart contracts.

Company involved

Moonwell

AI system involved

Claude Opus 4.6

4 source articles · read the reporting →

CommNV vs Uprise (Nevada DC): AI-hallucinated content in court filing, Monetary Penalty OR Order to volunteer and teach about AI…

The AI system generated fabricated legal citations that were included in a court filing, misleading the court and opposing counsel.

Company involved

Christopher Day

1 source article · read the reporting →