Founder charged with $40 million AI fraud

Albert Saniger, the founder and former CEO of Nate, an e-commerce app, has been charged with securities and wire fraud by U.S. authorities.

The charges stem from allegations that Nate, marketed as an AI-powered universal shopping cart, actually relied on hundreds of human contractors in the Philippines to manually complete transactions.

Saniger raised over $40 million from investors by claiming that Nate utilised advanced AI to automate online purchases without human intervention.

Acting U.S. Attorney Matthew Podolsky alleged Saniger duped investors by “exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed.”

The company acquired AI technology from a third party and had a team of data scientists develop it, but authorities claimed the app never achieved the ability to consistently complete e-commerce purchases.

During a busy holiday season in 2021, it’s alleged that Saniger directed Nate’s engineering team to develop bots to automate some transactions alongside human workers.

Nate ceased operations in January 2023, and Saniger terminated all of Nate’s employees after media reports questioned the app’s capabilities.

The securities and wire fraud charges each carry a maximum sentence of 20 years behind bars. The SEC suit seeks to ban Saniger from holding office in similar companies and return investor funds.