A 35-year-old chief executive officer (CEO) and founder of an online shopping application has been charged with fraud by the U.S. Department of Justice (DOJ) after making false claims that the shopping app was powered by artificial intelligence (AI) agents.
But in reality, the agents were not AI but call center workers from the Philippines.
The Scheme
As early as 2018, Albert Saniger introduced his AI-powered shopping app, “Nate.”
He promised a “universal” checkout experience and claimed the app could transact online without human intervention. This meant Nate users could buy from any e-commerce site.
Because of this, the startup raised more than $50 million from investors such as Coatue and Forerunner Ventures, with the most recent funding being a $38 million Series A in 2021 led by Renegade Partners.
The Revelations
However, in 2022, technology-and-business-focused publication The Information published an exposé alleging that Nate heavily relied on human contractors.
The scenario was investigated by the DOJ, which found that Nate had acquired AI tools and hired data scientists.
But the investigation also revealed that there was no actual automation in the so-called AI shopping app, and the automation rate was “effectively 0%.” Instead, Saniger hired call center agents from the Philippines to manually complete purchases on Nate.
Moreover, DOJ wrote that Nate went bankrupt in January 2023, and the CEO was forced to sell its assets, leading investors to suffer “near total losses.” Saniger also resigned as Nate’s CEO that year, according to his LinkedIn profile.
Saniger’s case centers on defrauding investors and prospective investors by making false and misleading statements about Nate’s use of proprietary AI technology and its operational capabilities.
“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. 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. This Office and our partners at the FBI will continue to pursue those who seek to harm investors by touting false innovation.”
Matthew Podolsky, Acting U.S. Attorney
If found guilty, Saniger faces one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which also carries a maximum sentence of 20 years in prison.
AI in Startups
This is not the first time a startup has claimed to fully utilize AI technology but failed to do so.
In 2023, technology-focused publication The Verge reported that Presto Automation, an AI-powered drive-thru company claiming to be “one of the largest labor automation technology providers in the industry,” was notified by the U.S. Securities and Exchange Commission.
According to a company filing, Presto Automation hired off-site human workers to complete more than 70% of orders—tasks that were supposed to be handled by AI agents.
Also similar to Nate, the human workers for Presto Automation were based in the Philippines.
As reported by The Verge, a pattern is emerging in which startups claim to use AI solutions but instead rely on contractors in countries with lower labor costs.
This article is published on BitPinas: US DOJ Says “AI” Shopping App Was Run by Humans in the Philippines
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