The founder of an AI-based tool designed to automate online shopping checkouts has been charged with fraud. Legal authorities claim that this innovative process was actually reliant on human workers in the Philippines rather than the advanced technology promised to investors.
Founded in 2018, the Nate app aimed to provide users with a seamless method to purchase products from various e-commerce platforms with a single click. The startup boasted significant backing, raising tens of millions of dollars, notably a $38 million Series A round in 2021 led by Renegade Partners. However, the company faced financial difficulties and was compelled to liquidate its assets in early 2023, resulting in substantial losses for its investors.
Former CEO Albert Saniger has been indicted by the Department of Justice, accused of engaging in a fraudulent scheme that misled both investors and prospective investors regarding the company’s alleged use of proprietary AI technology. The DoJ asserts that while Saniger presented the app as capable of operating without human intervention, this was far from reality.
According to court documents, the automation rate for the app was effectively zero percent. Instead of employing AI to navigate checkouts autonomously, Nate resorted to hundreds of contractors labeled as “purchasing assistants,” based in a call center in the Philippines. Saniger allegedly restricted access to essential data, misleading not only investors but also a substantial number of employees about the operational capabilities of the company.
Saniger now faces severe legal repercussions, including one count of securities fraud and one count of wire fraud, each carrying potential sentences of up to 20 years in prison. Acting US Attorney Matthew Podolsky noted, ‘As alleged, Albert Saniger misled investors by exploiting the promise of AI technology to build a false narrative about innovation that never existed… This type of deception victimizes innocent investors and undermines genuine advancements in the field.’
As the case unfolds, the tech community and investors are left watching closely, contemplating the implications of such fraudulent behavior on the burgeoning AI market.
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