MANILA, Philippines – Albert Saniger, the founder and former CEO of the artificial intelligence (AI)-powered shopping app 'Nate,' has been indicted by the U.S. Department of Justice (DOJ) for allegedly defrauding investors out of a significant amount of investment funds, the DOJ announced Wednesday local time.
Founded in 2018, Nate attracted over $50 million in total investment from prominent firms such as Coatue and Forerunner Ventures, most recently raising $38 million in a Series A round led by Renegade Partners in 2021.
Nate promoted itself as offering a "universal" checkout experience through AI technology, allowing users to purchase items from any online retailer with a single click. However, according to the U.S. Attorney's Office for the Southern District of New York (SDNY), the reality was that hundreds of contract workers in call centers in the Philippines were heavily relied upon to manually process these purchases.
The indictment alleges that Saniger raised millions of dollars in venture capital by claiming that Nate's AI could handle online transactions "without human intervention," except in exceptional cases such as transaction failures. Despite Nate acquiring some AI technology and hiring data scientists, the DOJ contends that the actual automation rate of the app was virtually 0%.
Nate's excessive reliance on human labor was previously revealed in a 2022 investigation by the IT media outlet 'The Information.'
Saniger did not respond to requests for comment. His LinkedIn profile lists him as a managing partner at Buttercore Partners, a venture capital firm based in New York, which also did not respond to requests for comment.
According to the DOJ indictment, Nate faced financial difficulties and had to sell its assets in January 2023, resulting in investors losing "nearly their entire investment." Albert Saniger's LinkedIn profile indicates that he was no longer CEO as of 2023.
Nate is not the only startup accused of exaggerating its AI capabilities. In 2023, 'The Verge' reported that an "AI" drive-thru software startup also heavily relied on a workforce in the Philippines.
More recently, 'Business Insider' reported that 'EvenUp,' an AI-powered legal tech unicorn, also had a significant portion of its work handled by humans.
This case serves as a warning about the exaggerated promotion of AI technology and investment solicitation practices, underscoring the need for investor caution and increased transparency in the startup ecosystem.
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