AI App Founder Charged with Fraud
AI App Founder Faces Fraud Charges
US authorities have filed charges against Albert Saniger, founder and former CEO of Nate, an e-commerce app. The Justice Department and the Securities and Exchange Commission (SEC) allege Saniger defrauded investors by falsely claiming his app was AI-powered when it primarily relied on human workers in the Philippines.
Saniger was charged with one count of securities fraud and wire fraud. The SEC filed a parallel civil action. Court documents reveal Saniger launched the Nate app in July 2020, marketing it as an AI-driven solution for automated online shopping, including filling in shipping details and sizing information without human intervention.
The Deception Unveiled
However, the Justice Department alleges Saniger employed hundreds of Filipino contractors, acting as "purchasing assistants," to manually process purchases made through the Nate app. This contradicts the app's advertised AI capabilities.
Acting US Attorney Matthew Podolsky stated Saniger exploited the appeal of AI technology to create a misleading narrative of innovation. He allegedly raised over $40 million in investments from venture capital firms, concealing the true nature of the app's operations from both investors and employees.
Consequences and Impact
Podolsky emphasized the severe consequences of such deception, stating it not only harms investors but also misdirects capital from legitimate businesses, fosters investor skepticism towards genuine AI breakthroughs, and hinders AI development. While Nate did acquire AI technology and employed data scientists, authorities claim the app never achieved consistent automated e-commerce functionality—its automation rate was effectively zero.
The SEC's court filing indicates Nate ceased operations in January 2023 after media reports questioned its AI claims. Saniger subsequently terminated all employees. Each fraud charge carries a maximum 20-year prison sentence. The SEC is seeking a ban on Saniger holding office in similar companies and the return of investor funds.
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