AI shopping app allegedly used humans, founder charged with fraud

Turns out the founder of an artificial intelligence-powered shopping app wasn't that intelligent.

Albert Saniger, the founder of an AI shopping app known as Nate, was indicted Wednesday by the United States Department of Justice (DOJ) on charges of fraud. The DOJ alleges that Saniger "engaged in a scheme to defraud investors and prospective investors in his start-up Nate, Inc. by making materially false and misleading statements about the company's use of proprietary artificial intelligence ("AI") and its operational capabilities."

Nate is an app that was designed in 2018 to use AI to create a one-stop checkout for multiple e-commerce shops, allowing users to complete transactions and purchases with a single click, no matter the retailer. The DOJ claims that is not how the app works; rather, "transactions processed through nate [sic] were, at times, manually completed by contractors in the Philippines and Romania and, at other times, completed by bots." The DOJ asserts that Nate's actual usage of AI for transaction completion was "essentially 0."

The DOJ further claims that Saniger knew fully well that Nate required manual input to function but continued to sell the app as "AI-driven" to secure investments, including a $38 million Series A investment in 2021.

As a final point in the DOJ's indictment, Saniger allegedly began liquidating Nate's assets at the beginning of 2023 to cover expenses after cash ran dry. According to the DOJ, this left investors "with near total losses."

You can read the full indictment filed by the DOJ via the link in the sources section below.