Fintech Founder Charged with Fraud for Misrepresenting AI Capabilities in Shopping App

Fintech founder charged with fraud after 'AI' shopping app found to be powered by humans in the Philippines | TechCrunch

Albert Saniger, the founder and former CEO of Nate, an AI shopping app that promised a "universal" checkout experience, was charged with defrauding investors on Wednesday, according to a press release from the U.S. Department of Justice. Founded in 2018, Nate raised over $50 million from investors like Coatue and Forerunner Ventures, most recently raising a $38 million Series A in 2021 led by Renegade Partners. Nate said its app's users could buy from any e-commerce site with a single click, thanks to AI. In reality, however, Nate relied heavily on hundreds of human contractors in a call center in the Philippines to manually complete those purchases, the DOJ's Southern District of New York alleges. Saniger raised millions in venture funding by claiming that Nate was able to transact online "without human intervention," except for edge cases where the AI failed to complete a transaction. But despite Nate acquiring some AI technology and hiring data scientists, its app's actual automation rate was effectively 0 percent, the DOJ claims. Nate's heavy usage of human contractors was the subject of an investigation by The Information in 2022. Saniger didn't respond to a request for comment. Saniger is currently listed as a managing partner at New York VC Buttercore Partners, which didn't respond to a request for comment either. The DOJ's indictment says that Nate ran out of money and was forced to sell its assets in January 2023. Albert Saniger's LinkedIn profile indicates he was no longer CEO as of 2023. Nate isn't the only startup that has allegedly exaggerated its AI capabilities. For example, an 'AI' drive-through software startup was also powered largely by humans in the Phillippines, The Verge reported in 2023. More recently, Business Insider reported that an AI legal tech unicorn, EvenUp, used humans to do much of its work.

Tech CEO charged for faking AI with human labor.

Albert Sangier's Nate service claimed it enabled customers to "skip the checkout" using artificial intelligence, but reporting by The Information in 2022 revealed that "between 60 percent and 100 percent" of transactions were actually handled manually -- primarily by workers in the Philippines. And this isn't the only company to be caught doing it. The DOJ has now charged Sangier with securities fraud and wire fraud following an FBI investigation, describing his company as "a scheme filled with smoke and mirrors."

This Company's 'AI' Was Really Just Remote Human Workers Pushing Buttons

Albert Saniger raised $40 million for Nate, an e-commerce company that supposedly used AI to help people complete online purchases. That AI didn't exist and he's now facing prison time. A tech CEO who claimed to have built a cutting-edge AI for e-commerce was actually having human workers doing the tasks behind the scenes, according to a federal indictment. Federal prosecutors in New York charged 35-year-old Albert Saniger with securities fraud for allegedly lying to investors about what his AI could do. In 2018, Saniger founded Nate, an e-commerce company that claimed it was developing an AI program that could complete online purchases for the user with a single tap. The AI was designed to handle things like adding the shipping address and billing information. "Saniger repeatedly told investors and the public that the company's app used proprietary AI technology to autonomously complete online purchases on behalf of users," the Justice Department says. This included the claim that the AI could complete orders without human intervention at a 93% to 97% completion rate, according to the indictment. In addition, Saniger distinguished his technology from automated bots, saying Nate relied on neural networks to complete actions like a human would. He raised over $40 million from investors and hired a team of data scientists to help develop the AI. However, federal prosecutors allege that Saniger knew his technology was a sham. "As Saniger knew, at the time Nate was claiming to use AI to automate online purchases, the app's actual automation rate was effectively zero percent," the Justice Department says. "Saniger concealed that reality from investors and most Nate employees: he told employees to keep Nate's automation rate secret." Instead, Saniger allegedly hired hundreds of human remote workers, many based in the Philippines, to manually process transactions for his company's AI program. By fall 2021, Saniger directed his company to develop automated bots, "despite his numerous prior representations that Nate did not use bots (or 'dumb bots,' as he referred to them)," the DOJ says. The alleged fraud came to light after The Information reported about the exaggerated claims involving Nate's AI program in June 2022. "Ultimately, Albert Saniger, the defendant, never successfully developed or deployed functional AI on Nate to automate customer purchases," the indictment adds. "In or about January 2023, Nate ran out of money, and the company was forced to sell its assets. Nate's investors were left with near total losses." Saniger didn't immediately respond to a request for comment. According to his LinkedIn profile, he was CEO of Nate until 2023 before becoming a partner at venture capital firm Buttercore. If found guilty of securities fraud and wire fraud, he faces a maximum penalty of 40 years in prison.

Tech founder charged with fraud for 'AI' that was secretly overseas contract workers

The US Department of Justice has indicted Albert Sangier for defrauding investors with misleading statements about his Nate financial technology platform. Founded by Sangier in 2018, Nate claimed it could offer shoppers a universal checkout app thanks to artificial intelligence. However, the states that the so-called AI-powered transactions in Nate were actually completed by human contractors in the Philippines and Romania or by bots. Sangier raised more than $40 million from investors for the app. This case follows reporting by in 2022 that cast light on Nate's use of human labor rather than AI. Sources told the publication that during 2021, "the share of transactions Nate handled manually rather than automatically ranged between 60 percent and 100 percent." Many ambitious and ethically challenged entrepreneurs have attempted to make their fortunes by human actions as a mechanical or technological innovation over the centuries. Claiming the results as AI work is just the most digital age application of the idea.

Founder of Nate app faces fraud charge for using "AI" that was really human call center workers

Serving tech enthusiasts for over 25 years. TechSpot means tech analysis and advice you can trust. What just happened? There's plenty of debate about the definition of AI, but one thing it certainly isn't is a group of humans working away in the Philippines and Romania. Albert Saniger, the founder and former CEO of shopping app Nate, tried to pass off the work of these flesh-and-blood contractors as AI, and has now been charged with defrauding investors by the DoJ. Saniger launched the Nate app in 2018. It promises to act as a universal shopping cart that simplifies online shopping by enabling users to skip the checkout on any retail website by reducing the process to a single tap. The app was advertised as being powered by AI, with the technology entering billing and shipping information and confirming the purchases. But according to the DoJ, it actually relied heavily on hundreds of human workers mostly located in call centers in the Philippines and Romania to manually complete the transactions. Saniger had also repeatedly made assurances that Nate did not use "dumb bots," but in fall 2021, he directed the app's engineering team to develop bots to automate some transactions on the app. These were used alongside the manual teams to complete the purchases, not the promised AI, states the DoJ. Nate had raised over $50 million from investors since launch, raising $38 million in 2021, thanks mostly to Saniger's claims that the app completed purchases without human interaction, except for edge cases where the AI failed to complete a transaction. In 2022, The Information carried out an investigation into Nate. Sources told the publication that during 2021, the share of transactions Nate handled manually rather than automatically ranged between 60% and 100%. The DoJ indictment says that Nate was forced to sell its assets in January 2023 after running out of money, leaving investors with "near total" losses. 35-year-old Saniger, of Barcelona, Spain, is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which also carries a maximum sentence of 20 years in prison. This isn't the first case of human workers being passed off as AI. In December 2023, Presto Automation, which calls itself one of the largest labor automation technology providers in the industry, revealed in an SEC filing that almost three-quarters of orders taken by its fast food voice-ordering products were aided by off-site agents working in areas such as the Philippines. Presto previously claimed that 95% of orders received by its drive-thru chatbots were taken without human intervention.

CEO Faces Fraud Charge After AI Shopping App Allegedly Found Using Humans

Nate was an AI shopping app that promised to automate the checkout process. DOJ says workers in the Philippines completed transactions manually. The Department of Justice has charged a founder with defrauding investors after his AI shopping app was allegedly discovered to be nothing more than a couple of people in a trench coat. Nate offered a mobile app that promised users a one-click checkout experience on any e-commerce website "without human intervention," effectively meaning they could store their credit card and shipping information with Nate instead of inputting it on each website. But prosecutors say the company relied almost entirely on human workers to complete checkouts. Oops. According to the indictment, Nate's actual automation rate was effectively zero. Instead, the company relied on hundreds of human contractors in a call center located in the Philippines to actually complete transactions. Maybe by 'AI', the company was actually referring to "Asian Intelligence." Nate raised over $50 million between 2018 and 2021. The Information first reported on the allegations against Nate and its CEO Albert Saniger back in 2022. Here is an excerpt from the report: To process transactions automatically on retailer sites without the aid of humans, Nate's software needed to figure out how to locate specific buttons on the page, such as the one that adds an item to a shopping cart, without getting blocked by trackers on the site that look for automated bots, said two people with direct knowledge of the technology. That proved difficult. As a result, throughout 2021, the share of transactions Nate handled manually ranged between 60% and 100%. When Paul Hudson from Glade Brook went to order a pair of Levi's jeans from the denim maker's website using Nate's checkout, Saniger wrote in a corporate Slack channel called "vip-notificaitons-for-albert" to alert colleagues that a transaction needed processing right away. Many companies in the AI field still rely on humans to some degree, especially to validate data that has been generated by an algorithm, with the hope being that AI will soon be able to take over entirely. Hot startups like Scale AI are infamous for relying on farms of cheap labor to label data and correct outputs of AI models. EvenUp, a startup that says it uses AI to automate the process of writing legal claims, was reportedly relying on humans as recently as late last year to correct AI-generated texts. The most successful AI startups thus far are the ones making tools, and mainstream adoption of AI by enterprises remains a question mark over concerns about reliability. Where Nate seems to have gotten into hot water was explicitly claiming that humans were almost never used in the checkout process. Maybe the company thought it could "fake it till you make it" and simply ran out of time to get the product working as intended. But it was also entering an incredibly crowded space, with Amazon dominating e-commerce and other companies like Shopify introducing their own one-click checkout products. It also is hard to see how Nate could grow a business around a relatively simple feature. Similar companies like Bolt, another one-click checkout startup, have only managed to generate a pittance of revenue. Nate, which still appears to exist, relied heavily on commissions to try and grow its app, offering influencers the ability to create lists of their favorite products in the app and receive a cut of any sale. Funnily enough, however, Nate may have been onto something with its product. Amazon, OpenAI, and Google are amongst the companies that have recently introduced "agents" they market as being able to automatically perform tasks including online shopping for users. The products remain nascent, and users have complained they are slow, expensive, and buggy. They do present some potential to automate arduous tasks and make computing more accessible to demographics like the elderly. Saniger is facing one count of securities fraud and one count of wire fraud, both of which could result in up to twenty years in prison.

Tech CEO promised AI but hired workers in the Philippines instead, FBI claims

This time, humans are coming for the AI's jobs. Credit: rob dobi / Getty Images The former CEO of fintech app Nate has been charged with fraud for making misleading claims about the app's artificial intelligence technology -- or lack thereof. In a bizarre twist from the usual AI narrative, the FBI alleges that this time human beings were doing the work of AI, and not the other way around. According to a press release from the U.S. Attorney's Office, Southern District of New York, Albert Saniger has been indicted for a scheme to defraud investors. "As alleged, Albert Saniger misled investors by exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed," Acting U.S. Attorney Matthew Podolsky said in the release. Government attorneys say Nate claimed to use AI technology to complete the e-commerce checkout process for customers. In reality, they allege the company hired a team of human contractors in the Philippines to do the work. In total, Saniger raised more than $40 million from investors. "In truth, Nate relied heavily on teams of human workers -- primarily located overseas -- to manually process transactions in secret, mimicking what users believed was being done by automation," said FBI Assistant Director in Charge Christopher G. Raia. "Saniger used hundreds of contractors, or 'purchasing assistants,' in a call center located in the Philippines to manually complete purchases occurring over the Nate app." Nate isn't the only startup accused of masking human labor as "AI automation." Drive-thru company Presto, with clients like Carl's Jr., Hardee's, Del Taco, and Checkers, claimed to automate drive-thru orders with AI, but reportedly relied on outsourced workers (also in the Philippines) for 70 percent of its orders, as Bloomberg reported in 2023. And legal startup EvenUp, which purportedly automated personal injury claims, "relied on humans to complete much of the work," according to a 2024 Business Insider report. The much-hyped AI industry promises to reduce labor costs and increase efficiency across industries. In turn, this has incentivized sketchy startup practices as opportunistic entrepreneurs market their apps based on future-facing potential. The Information first reported that the Nate app might have "exaggerated tech capabilities to investors" back in 2022. At the time, e-commerce was experiencing a "pandemic-fueled shopping boom," the outlet reported, making fintech startups irresistibly appealing to venture capitalists. According to the new indictment, Saniger "concealed" the app's near zero percent automation rate from investors and even his own employees, restricting Nate's automation data as a "trade secret." The "fake it till you make it" mentality is a well-established doctrine in the startup playbook, but clearly a risky one, at least, according to the FBI and the U.S. Attorney's Office. Instead of raising money, Saniger is now facing one charge each of securities fraud and wire fraud; both charges carry maximum sentences of 20 years in prison. Mashable attempted to contact Saniger, and we'll update this article if we get a response.

'AI-powered' shopping app alleged to have been human-powered

You may have occasionally joked about how companies these days seem to be falling over themselves to launch something, anything, that has AI, even just a little bit, somewhere under the hood. That way they can run dazzling ad campaigns that make the product sound like it's at the cutting-edge, powered by this new-fangled technology that everyone's talking about. But one tech founder, Albert Saniger, is now in hot water after being charged with making false claims about his company's technology after it was found that his "AI-infused" universal shopping app was actually powered by a bunch of people in a Philippines call center. Recommended Videos Saniger, the 35-year-old founder and former CEO of Nate, was this week indicted for defrauding investors who funded the shopping app, according to a release from the U.S. Department of Justice. The Nate shopping app launched seven years ago and raised more than $50 million from various investors. Saniger allegedly defrauded investors by making claims about his company's purported AI capabilities while covertly employing workers to create the illusion of technological automation. Nate's founder marketed the software as a universal shopping cart app that simplified the e-commerce experience by allowing customers to skip the checkout process on retail websites, with Nate supposedly using AI to autonomously navigate the checkout process, completing it on behalf of the shopper in a single tap. It meant that if a shopper found, for example, a pair of shoes they wanted to purchase on a particular e-commerce site, they could do so by opening the Nate app and clicking "buy." The Nate app purported to take care of the remainder of the checkout process by using AI to select the appropriate size, enter billing and shipping information, and confirm the purchase. The U.S. Attorney's Office said that while Saniger had indeed acquired AI technology from a third party and hired a team of data scientists to develop it, Nate's AI never achieved the ability to consistently complete e-commerce purchases. The tech founder is alleged to have concealed this from investors. Rather than deploying AI, Nate instead relied on teams of human workers to manually process transactions in secret, mimicking actions that users believed was being carried out by AI. Saniger is accused of having used "hundreds" of contractors located in a call center in the Philippines to manually complete purchases occurring over the Nate app, though during a busy holiday period, the company's engineering team also developed bots to automate some of the transactions. Acting U.S. Attorney Matthew Podolsky said of the alleged crime: "This type of deception not only victimizes innocent investors, it diverts capital from legitimate startups, makes investors skeptical of real breakthroughs, and ultimately impedes the progress of AI development." In 2023, the U.S. Federal Trade Commission told companies to watch their claims regarding the use of AI, warning them to avoid exaggeration and overpromising when it comes to announcing AI capabilities associated with their products.

Startup CEO Charged After "AI" Turns Out to Be Humans in the Philippines - Decrypt

A tech founder who raised over $40 million pitching a cutting-edge AI shopping app has been charged in the U.S. with fraud after it was revealed the AI powering the app was a call center full of human workers in the Philippines. Albert Saniger, 35, founder and former CEO of "nate," allegedly misled investors by claiming the company's e-commerce app used proprietary AI to automate online purchases. "Albert Saniger misled investors by exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed," Matthew Podolsky, Acting U.S. Attorney for the Southern District of New York, said. "This type of deception not only victimizes innocent investors, it diverts capital from legitimate startups, makes investors skeptical of real breakthroughs, and ultimately impedes the progress of AI development." Launched around 2018, nate marketed itself as a universal shopping cart, offering users a single-tap checkout experience across any e-commerce site. Saniger told investors that nate's tech could smartly fill in shipping details, select sizes, and complete purchases without human involvement. For example, if a shopper found a pair of sneakers online, they could open the nate app, tap "buy," and the app claimed it would handle the rest, including selecting the size, entering payment and shipping details, and completing the purchase using AI. But much like Elizabeth Holmes' Theranos blood testing devices, it didn't work, and the "AI" couldn't handle most transactions. So instead, nate quietly turned to humans and hired a call center of workers in the Philippines to mimic the automation users believed was happening behind the scenes.

Former Nate CEO who used human workers instead of AI allegedly defrauded investors lured by new tech of millions

A fintech startup that raised $40 million based on the premise of its artificial intelligence capabilities was fueled by human labor, allegedly defrauding investors lured by the new technology of millions, federal prosecutors said this week in a statement. Albert Saniger, 35, the former CEO and founder of Nate in 2018, who is from Barcelona, Spain, was indicted in the Southern District of New York for engaging in a scheme to allegedly defraud investors and making false statements about his company's AI capabilities. Nate, an e-commerce company, launched the nate app that claimed to streamline the online shopping checkout process via a single AI-powered tap option. But the app was not powered by advanced AI technology at all, according to the indictment. With the promise of custom-built "deep learning models" that would allow the app to directly purchase goods on product pages in fewer than three seconds, Saniger raised over $40 million. While instructing employees to keep nate's reliance on overseas workers secret, he pitched investors an AI-driven product capable of 10,000 daily transactions. Instead, the app allegedly relied heavily on overseas workers in two different countries who manually processed transactions, mimicking what users believed was being done by automation. Saniger, meanwhile, allegedly told investors and the public that the transactions were being completed by AI. "Saniger allegedly abused the integrity associated with his former position as the CEO to perpetuate a scheme filled with smoke and mirrors," the U.S. Justice Department said in a statement. In the technology's absence, Saniger allegedly relied heavily on hundreds of workers at a call center in the Philippines, court documents said. When a deadly tropical storm struck the country in October 2021, the indictment said, nate established a new call center in Romania to handle the backlog of customer services. Investors were likely never exposed to the lull in transactions because Saniger directed that transactions by investors be prioritized to avoid suspicion. The aftermath of the company's fallout in 2023, left investors with near-total losses, the indictment said. U.S. private AI investment grew to $109.1 billion last year -- and the U.N. trade and development arm said market share is poised to climb to $4.8 trillion by 2033. AI is widely perceived as being free from human intervention but the reality paints a more complicated picture. Nate is not the only company that has capitalized on AI through cheap labor overseas. In 2023, The Washington Post exposed 'digital sweatshops' in the Philippines where employees worked on content to refine American AI models for a company called Scale AI, which multinational technology conglomerates like Meta, Microsoft and OpenAi utilize. CBS News reached out to the U.S. attorney's office and Saniger for comment.

App promising a universal shopping experience automated with AI actually used a small army of human workers in the Philippines and Romania instead

The power of a button or in this instance, several hundred people pressing other buttons. In the world of technology, exaggerating the capabilities of a product is pretty much the norm. But when one app company managed to raise millions of dollars in investments on the promise that it would be fully automated via AI, the US Department of Justice charged its former CEO with fraud because it turns out that the actual 'AI' was in fact several hundred call centre workers instead. The company in question is Nate, which started in 2018 and rapidly amassed over $50 million in investments, according to TechCrunch. It did this because the company's product, a universal shopping phone app, was claimed to use AI to fully automate the whole buying process. Nate's gist is that you would see a product you like, click a button, and machine learning will then sort out the transaction for you -- including picking the right version of the product, payment details, and shipping. However, an investigation by The Information (via TechSpot) showed that AI wasn't used at all -- in fact, it was just call centre workers in countries such as Romania and the Philippines that would be furiously clicking away behind the scenes. While there is an element of comedy to all of this, the law in many countries around the world has a word for this sort of thing, and the founder of Nate has indeed now been charged with fraud. The US Department of Justice was less than amused by the actions of Nate and its founder and CEO at the time, Albert Saniger, last week charging him for "making false claims about his company's artificial intelligence technology." Specifically, the FBI's Christopher G. Raia had this to say about the former CEO: "Albert Saniger allegedly defrauded investors with fabrications of his company's purported artificial intelligence capabilities while covertly employing personnel to satisfy the illusion of technological automation. Saniger allegedly abused the integrity associated with his former position as the CEO to perpetuate a scheme filled with smoke and mirrors." Saniger has been charged with one count of securities fraud and one of wire fraud, both of which carry maximum penalties of up to 20 years in prison. Along with The Information's investigation of Nate, the fact the company ran out of money a few years ago, requiring it to sell off most of its assets, leaving investors high-and-dry, was probably what brought the app company into the gaze of the Department of Justice and FBI. This isn't the first use of a claimed AI technology being nothing more than real humans beavering away behind the scenes and it certainly won't be the last. But it's a cautionary tale that, like with all things technology-wise, any marketing claims should be viewed with a wary eye unless indisputable evidence of it working as promised is handed over.

Feds, SEC charge app maker with fraud, saying 'AI' service was Philippine workers

US authorities allege the Nate app was not powered by artificial intelligence but actually overseas human workers who manually processed transactions. US authorities have charged a tech app founder with fraud, alleging that his advertised artificial intelligence-powered e-commerce app actually relied on human workers in the Philippines. Albert Saniger of Barcelona, Spain, founder and former CEO of the company Nate, was charged with one count of securities fraud and wire fraud, the Justice Department said in an April 9 statement, while the Securities and Exchange Commission filed a parallel civil action. Court documents said Saniger founded Nate around 2018 and launched an app of the same name in July 2020, marketing it as an AI-powered universal shopping cart that offered users the ability to complete online retail transactions, including filling in shipping details and sizing, without human input. The Justice Department alleged that, in reality, "Saniger used hundreds of contractors, or 'purchasing assistants,' in a call center located in the Philippines to manually complete purchases occurring over the nate app." Acting US Attorney for New York Matthew Podolsky alleged Saniger duped investors by "exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed." Under the guise of investing in the AI-powered app, Sangier allegedly solicited more than $40 million in investments from venture capital firms and told employees to hide the true source of Nate's automation. "This type of deception not only victimizes innocent investors, it diverts capital from legitimate startups, makes investors skeptical of real breakthroughs, and ultimately impedes the progress of AI development," Podolsky said. The company acquired AI technology from a third party and had a team of data scientists develop it, but authorities claimed the app never achieved the ability to consistently complete e-commerce purchases, and its actual automation rate was effectively zero. Related: Aussie regulator to shut 95 'hydra' firms linked to crypto, romance scams During a busy holiday season in 2021, it's alleged that Sanger directed Nate's engineering team to develop bots to automate some transactions on the app along with the human workers. Nate ceased operations in January 2023, and Saniger terminated all of Nate's employees after media reports started casting doubt on the app's capabilities, according to the SEC's court filing. The securities and wire fraud charges each carry a maximum sentence of 20 years behind bars. The SEC suit is asking the courts to ban Saniger from holding office in any similar company and return investor funds. Cointelegraph contacted Nate for comment. Information on Saniger's lawyers was not immediately available.

Nate's 'AI' was just people in a room: Startup founder charged with faking AI, raising $50 million on false claims

Albert Saniger, founder of the so-called AI-driven shopping app Nate, has been charged with defrauding investors by masking a human-powered operation as artificial intelligence. The US Department of Justice alleges Saniger raised over $50 million by claiming his app used proprietary AI to automate online purchases. In reality, call centre workers in the Philippines completed each transaction manually. Nate ran out of funds by early 2023, leaving investors with near-total losses.A Spanish-born entrepreneur who once promised a "one-tap" AI shopping experience is now facing serious fraud charges in the United States. Albert Saniger, founder and former CEO of Nate, a US-based fintech startup, has been accused of deceiving investors by claiming his app used cutting-edge artificial intelligence. In truth, the app depended on teams of human workers in the Philippines to manually complete user transactions. The charges, announced by the US Department of Justice (DoJ) on Wednesday, allege that Saniger built a false narrative around innovation to lure over $50 million in funding. If convicted, he could face up to 20 years in prison. Nate, which Saniger launched in 2018 after working briefly at Amazon in London, was marketed as a universal shopping cart app. Its pitch was bold: users could browse any e-commerce site and buy products with a single tap, skipping the checkout entirely. The app claimed to handle everything -- from choosing sizes to entering billing and shipping details -- using proprietary AI. In reality, it did no such thing. Behind the sleek user interface, there were hundreds of contractors -- referred to as "purchasing assistants" -- based in a call centre in the Philippines. These workers manually carried out every part of the shopping process that the app was supposed to automate. The FBI described Nate as a "scheme filled with smoke and mirrors." "As alleged, Albert Saniger misled investors by exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed," said Matthew Podolsky, acting US attorney for the Southern District of New York. "This type of deception not only victimises innocent investors, it diverts capital from legitimate startups, makes investors skeptical of real breakthroughs, and ultimately impedes the progress of AI development," Podolsky added. "This Office and our partners at the FBI will continue to pursue those who seek to harm investors by touting false innovation." According to the DoJ, Nate's actual automation rate was "effectively zero per cent". The app, which presented itself as a frictionless AI-powered experience, was instead driven by outsourced manual labour. The Verge was the first to report that Nate never used AI to autonomously navigate the checkout process. To the outside world, Nate was on the cutting edge of AI. To its users, it seemed like magic. But that illusion was built on human hands. When a user tapped to buy a product, it wasn't a machine handling the rest -- it was a real person, working quietly and anonymously behind the scenes. The DoJ says this "covert employment" was central to maintaining the façade. The app's central promise -- that AI could seamlessly complete online purchases across multiple retailers -- was never delivered. And yet, investors poured money in, believing they were backing a genuine technological breakthrough. By early 2023, Nate had run out of cash. The company was forced to sell its assets, and many investors were left with near-total losses. Saniger had already stepped down as CEO, according to his LinkedIn profile, and is now listed as a managing partner at a New York-based firm. His education includes an MBA from London Business School, and his career trajectory once looked promising. But now, he faces allegations that could end it altogether. The DoJ has not specified a court date yet, but the charges carry a maximum sentence of 20 years. The case against Saniger arrives at a time when AI claims are being scrutinised more closely than ever. From venture capital firms to everyday consumers, trust in tech promises is increasingly fragile. This story, of a startup that faked its AI credentials while burning through millions in funding, may only deepen that mistrust. For now, Saniger maintains his silence. The charges stand. And the gap between what Nate claimed to be and what it really was is now at the heart of a federal criminal case.

Nate founder charged with fraud over 'AI' shopping app secretly powered by humans

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. Founded in 2018, the nate app boasted that AI enabled it to help users buy a product from any e-commerce site with the click of a button, acting as a universal shopping tool. The firm raised tens of millions of dollars in funding, including a 2021 $38 million Series A round led by Renegade Partners and joined by Forerunner Ventures, Canaan Partners and Coatue Management. According to the DoJ, it ran out of funds and was forced to sell its assets in early 2023, leaving investors with "near total" losses. Former nate CEO Albert Saniger now faces an indictment from the Department of Justice's Southern District of New York charging him with engaging in a scheme to defraud investors and prospective investors by making false and misleading statements about the firm's "use of proprietary AI technology and its operational capabilities". According to the DoJ, Saniger touted nate's use of AI to investors, claiming it was "able to transact online without human intervention" except in certain "edge cases". In reality, says the DoJ, nate did not use AI to autonomously navigate the checkout process. While Saniger acquired AI technology from a third party and hired a team of data scientists to develop it, the tech never achieved the ability to consistently complete e-commerce purchases. In fact, "the app's actual automation rate was effectively zero percent". Saniger is accused of keeping this from not only investors but most employees, restricting access to nate's "automation rate dashboard". In truth, nate relied on hundreds of contractors, or "purchasing assistants," in a call centre located in the Philippines to manually complete purchases occurring over the nate app. Saniger - now listed as a managing partner at VC Buttercore Partners - is charged with one count of securities fraud, which carries up to 20 years in prison, and one count of wire fraud, which also carries a maximum sentence of 20 years. Acting US Attorney Matthew Podolsky says: "As alleged, Albert Saniger misled investors by exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed. "This type of deception not only victimises innocent investors, it diverts capital from legitimate startups, makes investors skeptical of real breakthroughs, and ultimately impedes the progress of AI development."