Evolv Stocks Fluctuate Amid FTC's Investigation into AI-Driven Systems

The FTC has accused Evolv of making misleading claims about the capabilities of its Evolv Express scanners to detect weapons in school environments and distinguish harmless personal items. The stock initially fell by 11% but later recovered to trade up by 1%. Under the proposed settlement terms, Evolv is prohibited from making unsubstantiated claims about the weapon detection capabilities of its product. Additionally, the settlement allows some K-12 schools to exit existing Evolv contracts, which typically involve multi-year commitments.

Samuel Levine, Director of the Consumer Protection Bureau, emphasized the necessity for accurate claims in technology, especially regarding child safety. Levine stated, "If you make these claims without adequate support, you can expect to hear from the FTC."

The FTC's complaint noted that Evolv misleadingly marketed the Evolv Express scanners as more accurate, efficient, and cost-effective than traditional metal detectors. The company’s promotional materials claimed that the scanners could help address the issue of weapons in schools.

Evolv's Express scanners are used in over 800 schools across 40 states, representing half of the company's business. The complaint highlighted instances where the scanners failed to detect weapons, including an incident in October 2022 where a seven-inch knife was not detected and was subsequently used in a school stabbing. Following this incident, the school adjusted the system's sensitivity, leading to a 50% false alarm rate.

In response to the need for improved detection, Evolv introduced a more precise setting in 2023 aimed at better identifying knives. However, the company acknowledged that some knives might still go undetected, which could lead to more false alarms and require additional personnel to operate the scanners. Evolv also suggested measures for schools to manually screen harmless items using conveyor belts, similar to those used with less expensive traditional metal detectors.