The founder of an AI-based tool designed for automating online shopping checkouts has been charged with defrauding investors, reportedly misleading them by claiming that the checkout process was automated through AI when, in fact, it was handled by human workers in the Philippines.
Founded in 2018, the nate app claimed to be a universal shopping tool that allowed users to purchase products from any e-commerce site with just a click, leveraging AI technology. The company secured tens of millions in funding, including a $38 million Series A round in 2021 led by Renegade Partners, with participation from Forerunner Ventures, Canaan Partners, and Coatue Management.
According to the Department of Justice (DoJ), the company eventually ran out of funds and was forced to sell its assets in early 2023, resulting in “near total” losses for investors.
Former CEO Albert Saniger is now facing an indictment from the DoJ’s Southern District of New York. He is charged with orchestrating a scheme to defraud both investors and prospective investors by making false and misleading claims regarding the company’s use of proprietary AI technology and operational capabilities.
The indictment states that Saniger promoted the idea that nate’s AI allowed for online transactions without human involvement, save for rare instances. However, the DoJ asserts that nate did not effectively use AI to conduct the checkout process autonomously. Although Saniger obtained AI technology from a third party and hired data scientists to develop it, the technology ultimately failed to perform consistently in completing e-commerce purchases.
Reports claim that the app’s actual automation rate was essentially zero percent. Saniger allegedly concealed this information not only from investors but also from many employees by limiting access to internal data about the app’s automation rate.
In reality, nate relied on hundreds of contractors, referred to as “purchasing assistants,” working in a call center in the Philippines to manually complete transactions via the application.
Saniger, who is currently a managing partner at VC Buttercore Partners, faces one count of securities fraud, which carries a potential sentence of up to 20 years, and one count of wire fraud, which also has a maximum penalty of 20 years.
Acting US Attorney Matthew Podolsky commented, “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. Such deception not only victimizes innocent investors but diverts capital from legitimate startups, fosters skepticism toward genuine breakthroughs, and ultimately hinders the advancement of AI development.”