Startup’s ‘AI’ Was a Fraud, Human Labor In Philippines Did the Work

Albert Saniger, founder and former CEO of Nate, a startup that claimed to use AI to power online shopping, has been charged with fraud by U.S. authorities.

The Department of Justice (DOJ) alleges that Saniger misled investors by saying his app was driven by AI when, in reality, it relied on human workers in the Philippines to complete purchases manually.

Nate launched its app in 2018 to provide users with an effortless “buy now” functionality for all online stores. Investors learned that Nate’s proprietary AI technology would enable users to complete the entire checkout process starting from selecting an item through shipping details entry using only a single click.

But according to the DOJ, Nate’s AI system didn’t actually work. Despite hiring data scientists and acquiring some AI tools, the automation rate was “effectively zero percent.” The purchases weren’t completed by AI but by hundreds of Filipino workers in a call center, who were manually handling transactions behind the scenes.

TechCrunch reports that Saniger raised over $50 million for Nate, including a $38 million Series A round in 2021. He told investors the app could function “without human intervention,” with only occasional “edge cases” needing manual help. But those claims, the DOJ says, were false.

“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 Acting U.S. Attorney Matthew Podolsky, as reported by the DOJ.

“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,” he adde.

FBI Assistant Director Christopher G. Raia added: “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.”

The indictment also revealed that Saniger kept the truth from many of his employees by restricting access to automation data and claiming the information was a “trade secret,” as reported by the DOJ. Nate eventually ran out of money and sold off its assets in early 2023, leaving investors with “near total” losses, as reported by TechCrunch.

Saniger, now 35 and based in Barcelona, faces up to 20 years in prison if convicted of securities and wire fraud. He is also being sued in a separate civil case by the U.S. Securities and Exchange Commission.