Nate Founder Charged With Fraud After The AI Shopping App Turned Out To Be Powered By Humans
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Albert Saniger, the founder and former CEO of an AI-based tool that promised the ability to automate online shopping checkouts, was charged with fraud due to claims that the process was not automated at all. As it turns out, it was actually carried out by human workers based in the Philippines.
The nate app was founded in 2018, when it emerged as an advanced tool claiming to use AI to help users buy products from any e-commerce website with a click of a button. It claimed to be the universal shopping tool that can make some more tedious processes simple, fast, and automated.
The company managed to raise tens of millions of dollars in funding, including a Series A round held in 2021, which raised $38 million. The round was led by Renegade Partners, with several other major participants, including Coatue Management, Forerunner Ventures, and Canaan Partners.
However, the US Department of Justice said that it ran out of funds and had to sell its assets around two years ago, in early 2023. This left investors with “near total” losses.
Failure To Develop An AI Solution
Now, Saniger is facing an indictment from the Department of Justice’s Southern District of New York, which charged him with engaging in a scheme to defraud investors and prospective investors. It accused him of making false and misleading statements regarding the company’s alleged use of proprietary AI technology.
Saniger claimed that the tool can use AI to transact online without human intervention except in certain “edge cases.” But, in reality, it did not use AI at all. Saniger did acquire AI from a third party, and he did hire a team of data scientist who were instructed to develop it. However, the technology did not achieve the ability levels that he promised, and certainly not the ability to consistently complete online purchases.
Instead, its actual automation rate was effectively 0%, according to DoJ. Saniger decided not to share this with investors, and even most employees were restricted from accessing nate’s “automation rate dashboard.”
To make up for this, he hired hundreds of contractors in a call center in the Philippines, having them manually complete purchases that occurred over the app.
