Albert Saniger, the founder and former CEO of Nate, an AI shopping app that aimed to provide a seamless checkout experience, was charged with defrauding investors, according to a press release from the U.S. Department of Justice.
Nate, which started in 2018, raised over $50 million from investors, including Coatue and Forerunner Ventures. Its latest funding round was a $38 million Series A in 2021, led by Renegade Partners.
The app claimed users could make purchases from any online store with just one click, thanks to AI technology. However, the DOJ alleges that Nate relied on hundreds of human workers in a call center in the Philippines to handle these transactions manually.
Saniger secured millions in funding by asserting that Nate could conduct online transactions “without human intervention,” except in rare cases when the AI struggled. Despite acquiring some AI technology and hiring data scientists, the DOJ claims the app’s actual automation rate was effectively zero.
The extensive use of human contractors at Nate was highlighted in a 2022 investigation by The Information.
Saniger has not responded to requests for comments. He is currently listed as a managing partner at New York VC Buttercore Partners, which also did not respond to inquiries.
According to the DOJ’s indictment, Nate ran out of funds and had to sell its assets in January 2023, resulting in significant losses for its investors. Saniger’s LinkedIn profile shows that he was no longer the CEO as of 2023.
Nate is not the only startup accused of overstating its AI capabilities. For instance, a drive-through software company labeled as “AI” was also found to be mainly operated by human workers in the Philippines, as reported by The Verge in 2023.
Recently, Business Insider also revealed that EvenUp, an AI legal tech unicorn, relied on humans for much of its operations.
Other Stories You May Like