According to a Wednesday press release from the U.S. Department of Justice, Albert Saniger, founder and former CEO of Nate, an AI shopping app that claimed to offer a "universal" checkout experience, has been charged with defrauding investors.
Founded in 2018, Nate raised over $50 million in funding from firms including Coatue and Forerunner Ventures, including a $38 million Series A round led by Renegade Partners in 2021. The company claimed its app, powered by AI, allowed users to complete purchases on any e-commerce website with a single click.
However, the U.S. Department of Justice's Southern District of New York alleges that Nate heavily relied on hundreds of human contractors in the Philippines to manually process these transactions. While Saniger told investors that Nate could conduct online transactions "without human intervention," the DOJ investigation found that despite the company acquiring some AI technology and employing data scientists, the app's actual automation rate was 0%.
Nate's extensive use of human contractors was previously the subject of a 2022 investigation by The Information. According to the indictment, Nate ran out of funds in January 2023, forcing it to sell its assets, resulting in investors losing "almost all" of their investment. Saniger's LinkedIn profile shows he ceased being CEO in 2023 and is currently a Managing Partner at Buttercore Partners, a New York venture capital firm.
Nate is not the only startup accused of exaggerating its AI capabilities. According to reports from The Verge and Business Insider, a Philippine "AI" drive-through software startup and the AI legal tech unicorn EvenUp were also exposed for primarily relying on manual labor to perform most of their work.
