Nate App Founder Charged With Fraud for Faking AI Use

Albert Saniger, founder and former CEO of so-called AI-powered shopping app Nate, has been charged with fraud by the US Department of Justice (DOJ). An April 9 press release revealed that a 2022 investigation found the app was secretly powered by human labor in the Philippines and Romania.

The Nate app was supposed to provide a “universal” shopping cart experience where users could make instant purchases across e-commerce sites. An AI assistant would then autofill information like addresses and payment details, effectively providing customers with a one-click purchasing button.

The app originally raised over $50 million in investments when it first launched in 2018, including $38 million in Series A funding. Saniger promised clients and investors that the app would require no human intervention except for “edge cases” where the AI tech wouldn’t work. Internal tests were said to show a success rate of 93% to 97%.

However, after a 2022 investigation by startup news outlet The Information showed that Nate relied heavily on the use of human labor, the startup quickly collapsed. “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,” reads the DOJ indictment.

An independent investigation by the US Federal Bureau of Investigation (FBI) found that the app’s actual use of AI technology was “effectively 0%,” according to the DOJ. Instead, the app relied almost exclusively on the labor of contractors, or “purchasing assistants,” located in the Philippines and Romania to complete purchases made through the app.

“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,” said Acting US Attorney for the Southern District of New York, Matthew Podolsky.

If found guilty, Saniger could be looking at a maximum combined 40-year prison sentence for one charge of securities fraud and one charge of wire fraud.

This indictment comes as more companies look to reduce human labor with the use of AI tools. According to the World Economic Forum, 41% of worldwide companies plan to replace human workers with AI tools by 2030.