Nate App’s ‘AI’ Was Human Labor, Say Feds
The founder of the shopping app Nate, which claimed to offer AI-powered online transactions, has been charged with fraud by US federal authorities.
Albert Saniger, founder and then-chief executive of the company, faces one count each of wire fraud and securities fraud. The announcement was made by the US Department of Justice (DOJ) on April 9, in a parallel civil action filed by the Securities and Exchange Commission (SEC).
Saniger is charged by authorities with lying to investors that Nate was a computerized, artificially intelligent shopping assistant capable of making online purchases automatically without any human involvement.
The Illusion of AI
Nate rolled out in 2020 and positioned as an “AI-powered universal shopping cart.” In real life, the DOJ only claims the app’s main function — purchasing — was manually carried out by a team of Filipino-based contractors.
Saniger is only accused of hiring hundreds of staff members, referred to as “purchasing assistants,” who personally carried out customer purchases, despite positioning only as fully automated.
$40M Raised on False Promises
The scam, it is alleged, helped Saniger to raise over $40 million in capital from venture capital firms. Prosecutors say he instructed employees to hide the human element from investors and the public at large.
“This type of fraud not only victimizes unsuspecting investors, it diverts capital away from legitimate startups,” said Acting US Attorney Matthew Podolsky.
Shutdown and Legal Fallout
During the 2021 holidays, Saniger supposedly instructed his engineers to develop bots to add to the pool of human labor. But authorities claim the app’s level of automation remained notional at zero.
Nate ceased in January 2023 when the press began questioning its assertions. Saniger subsequently let go of all staff.
He could receive up to 20 years for each charge if he’s convicted. The SEC is also seeking to have him prohibited from serving as an officer or director of any public company and to disgorge investor funds.
Nate was unavailable for a comment request. Saniger’s lawyer has not been stated.
