Albert Saniger, the creator and former CEO of Nate, an AI shopping application that claimed to provide a “universal” checkout experience, was indicted for misleading investors on Wednesday, as stated in a press statement from the U.S. Department of Justice.
Nate, established in 2018, secured nearly $50 million from investors including Coatue and Forerunner Ventures, with a recent $38 million Series A funding round in 2021 headed by Renegade Partners.
Nate said that users of their application may purchase from any e-commerce platform with a single click, facilitated by AI.
According to the allegations from the DOJ’s Southern District of New York, Nate mostly depended on several human contractors at a contact center in the Philippines to manually execute such transactions.
Saniger secured millions in venture capital by asserting that Nate could execute online transactions “without human intervention,” excepting exceptional instances when the AI was unable to finalize a transaction.
Despite Nate’s acquisition of AI technology and the employment of data scientists, the Department of Justice asserts that the app’s real automation rate was virtually 0%.
Nate’s extensive reliance on human contractors was investigated by The Information in 2022.
Saniger did not provide a response to the request for remark. He is now designated as a managing partner with New York venture capital firm Buttercore Partners, which also did not reply to a request for comment.
The DOJ’s charge states that Nate depleted its funds and was compelled to liquidate its assets in January 2023, resulting in “near total” losses for its investors. Albert Saniger’s LinkedIn page shows that he ceased to be CEO in 2023.
Nate is not the only firm that has purportedly inflated its AI capabilities. For instance, a drive-through software firm labeled as “AI” was mostly operated by humans in the Philippines, as reported by The Verge in 2023.
Recently, Business Insider revealed that the AI legal tech startup, EvenUp, used people to do a significant portion of its tasks.
