Fintech Founder Faces Charges of Fraud for Human-Powered 'AI' Shopping App
'AI' shopping app was found to be relying on human contractors rather than on AI technology.
Albert Saniger, the founder and former CEO of Nate, an AI shopping app that promised a “universal” checkout experience, was recently charged with defrauding investors on Wednesday, a press release from the U.S. The Department of Justice stated.
Back Story
Nate was founded in 2018 and would go on to raise over $50 million from investors like Coatue and Forerunner Ventures. Most recently, the company raised a $38 million Series A in 2021 led by Renegade Partners. According to Nate, its app’s users could buy from any e-commerce site with a single click, thanks to AI. However, that wasn't the case, as 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.
The releases suggested that 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%, the DOJ claims.
Wrong Side of the Law
Nate’s heavy usage of human contractors has always been questioned. It was the subject of an investigation by The Information in 2022. Currently, Saniger is listed as a managing partner at New York VC Buttercore Partners, and neither has responded to questions.
The DOJ’s indictment states that Nate ran out of money and was forced to sell its assets in January 2023, leaving its investors with “near total” losses. Albert Saniger’s LinkedIn profile indicates he was no longer CEO as of 2023.
