FTC fined 'robot lawyer' DoNotPay $193,000 over unproven AI legal-service claims

NYC's MyCity chatbot, launched October 2023 to help business owners, was found by The Markup (March 2024) to give dangerously inaccurate legal guidance — telling users that landlords could refuse Section 8 voucher holders, that employers could take a cut of workers' tips, and that there were no limits on residential rent, all illegal under NYC/NY law. The city initially kept the bot online with a disclaimer; it was ultimately taken down.

In a personal-injury suit against Avianca, attorney Steven Schwartz used ChatGPT for research and submitted a brief citing six judicial decisions that did not exist — ChatGPT invented them and even 'confirmed' they were real when asked. U.S. District Judge Castel sanctioned Schwartz and co-counsel Peter LoDuca $5,000 and required corrective letters. It became the landmark cautionary tale about AI hallucination in legal filings.