Due to his misleading claims about the artificial intelligence (or lack thereof) technology in the fintech app, Nate, the former CEO, has been charged with fraud.
The FBI claims that, in this case, humans were performing AI’s tasks, rather than the other way around, marking a strange departure from the standard AI narrative.
Albert Saniger has been charged with a plot to defraud investors, as stated in a press release from the U.S. Attorney’s Office, Southern District of New York.
“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,” Acting U.S. Attorney Matthew Podolsky said in the release.
According to government lawyers, Nate asserted that they used AI technology to help customers complete the e-commerce checkout procedure.
In actuality, they claim the company employed a team of human contractors in the Philippines to complete the work. Saniger raised more than $40 million from investors overall.
“In truth, Nate relied heavily on teams of human workers — primarily located overseas — to manually process transactions in secret, mimicking what users believed was being done by automation,” as stated by FBI Assistant Director in Charge Christopher G. Raia.
He added, “Saniger used hundreds of contractors, or ‘purchasing assistants,’ in a call center located in the Philippines to manually complete purchases occurring over the Nate app.”
There are other startups besides Nate that have been accused of passing off human labor as “AI automation.”
Presto, a drive-thru startup that has customers like Carl’s Jr., Hardee’s, Del Taco, and Checkers, claimed to use AI to automate drive-thru orders. However, according to a 2023 Bloomberg report, the company relied on outsourced workers (also in the Philippines) for 70% of its orders.
The possibility that the Nate app had “exaggerated tech capabilities to investors” was first raised by The Information in 2022.
The outlet reported that at the time, e-commerce was going through a “pandemic-fueled shopping boom,” which made venture capitalists find financial businesses very appealing.
Saniger “concealed” the app’s near zero percent automation rate from investors and even his own staff, according to the new indictment, and restricted Nate’s automation statistics as a “trade secret.”
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