A fintech app founder was indicted in the US after investors discovered that instead of using sophisticated artificial intelligence (AI), his company relied heavily on human workers in the Philippines.
A press release from the US Department of Justice said Albert Saniger, former chief executive of e-commerce startup Nate Inc, was charged for allegedly defrauding investors by falsely claiming that his startup, Nate Inc, used advanced AI for its online checkout app.
Nate has raised over $50 million from investors like Coatue and Forerunner Ventures and most recently sealed a $38 million Series A in 2021 led by Renegade Partners, TechCrunch reported on Friday.
In reality, US prosecutors said Nate Inc. used manual input from workers in the Philippines. Prosecutors alleged that Saniger raised over $40 million from venture capital firms based on misleading statements about the startup.
The press release said Nate distinguished itself from other e-commerce companies and apps through a single defining feature: the ability to intelligently and quickly complete retail transactions across all e-commerce sites through the use of AI technology.
Saniger repeatedly told investors and the public that the company’s app used proprietary AI technology to autonomously complete online purchases on behalf of users, per the announcement.
“As alleged, Saniger misled investors by exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed,” said acting US Attorney Matthew Podolsky.
According to the indictment, Saniger founded Nate around 2018, marketing its app as a tool that simplified online shopping using proprietary AI to allow users to complete purchases across different retail websites with a “single tap,” effectively automating the checkout process.
Prosecutors allege Saniger repeatedly told investors the app functioned autonomously through AI, distinguishing it from competitors. He allegedly claimed Nate was “able to transact online without human intervention,” except for occasional “edge cases.”
“While Saniger had acquired AI technology from a third party and hired a team of data scientists to develop it, the AI never achieved the ability to consistently complete e-commerce purchases,” the US Attorney’s office said.
The 35-year-old Saniger, who hails from Barcelona, Spain, is charged with one count of securities fraud, which carries a maximum sentence of 20 years in prison, and one count of wire fraud, which also carries a maximum sentence of 20 years in prison.
