Albert Saniger, the founder and former CEO of the fintech startup Nate, was charged on Wednesday with defrauding investors over false claims concerning the capabilities of his company’s technology, according to the U.S. Department of Justice.
Established in 2018, Nate billed itself as a cutting-edge artificial intelligence shopping app, promising users a seamless “universal checkout” experience across any e-commerce platform using advanced AI technology. Over the course of its operations, Nate received investments totaling more than $50 million from notable venture capital firms, including Coatue and Forerunner Ventures. Its most significant funding round, a $38 million Series A, was led by Renegade Partners in 2021.
However, federal prosecutors from the Southern District of New York now allege that Nate’s reliance on artificial intelligence was essentially nonexistent. Instead, it assertedly employed hundreds of human contractors working out of a call center in the Philippines, who manually completed tasks the company claimed were automated by AI. Contrary to public statements made by Saniger, which assured investors that Nate’s technology required minimal human oversight, the DOJ contends that Nate’s actual rate of automation was practically zero percent.
The discrepancy between Nate’s claims and its operational realities first surfaced publicly in a 2022 investigative report looking into Nate’s extensive use of human labor rather than technology-driven solutions. Prosecutors say Saniger leveraged these misleading assertions to attract millions in venture capital funding.
Saniger has not responded to requests for comment regarding the charges against him. He currently lists himself as a managing partner at Buttercore Partners, a venture capital firm based in New York City, which also did not provide comment on the matter.
In January 2023, Nate ran out of funding and was forced to sell off its remaining assets. Saniger has not served as CEO since that time.
This case follows a series of similar incidents in which tech startups have overstated their reliance on AI capabilities. Other recent notable examples include a software firm providing automated solutions for fast-food drive-through ordering, which was revealed to depend largely on human operators in the Philippines, and a legal tech unicorn company accused of similar exaggerations of its AI-driven procedures.
