Albert Saniger , founder and former CEO of e-commerce startup Nate , has been charged with defrauding investors after allegedly misrepresenting his company's AI capabilities , according to the US Department of Justice .
The DOJ alleges that while Nate raised over $50 million from venture capital firms by claiming its universal shopping cart app used proprietary artificial intelligence to complete online purchases automatically, the transactions were actually being processed manually by hundreds of human contractors at call centers in the Philippines.
According to the indictment, Nate's actual automation rate was "effectively zero percent" despite Saniger's repeated claims to investors that the app could "transact online without human intervention" except in rare edge cases. Saniger faces charges of securities fraud and wire fraud, each carrying a maximum sentence of 20 years in prison.
Founded in 2018, Nate distinguished itself in the e-commerce space by promising users they could purchase items from any online retailer with a single tap, with AI handling the entire checkout process. Its most recent funding round was a $38 million Series A in 2021 led by Renegade Partners , with participation from Coatue and Forerunner Ventures.
The DOJ claims Saniger deliberately concealed the company's reliance on human workers by restricting access to automation metrics and instructing employees to keep the automation rate secret under the guise of protecting "trade secrets."
The Financial Times reported in 2022 that Nate's manual processing rates ranged between 60 and 100 percent during 2021. The company reportedly ran out of money and sold its assets in January 2023, resulting in "near total" losses for investors.
The DOJ alleges that while Nate raised over $50 million from venture capital firms by claiming its universal shopping cart app used proprietary artificial intelligence to complete online purchases automatically, the transactions were actually being processed manually by hundreds of human contractors at call centers in the Philippines.
According to the indictment, Nate's actual automation rate was "effectively zero percent" despite Saniger's repeated claims to investors that the app could "transact online without human intervention" except in rare edge cases. Saniger faces charges of securities fraud and wire fraud, each carrying a maximum sentence of 20 years in prison.
Founded in 2018, Nate distinguished itself in the e-commerce space by promising users they could purchase items from any online retailer with a single tap, with AI handling the entire checkout process. Its most recent funding round was a $38 million Series A in 2021 led by Renegade Partners , with participation from Coatue and Forerunner Ventures.
The DOJ claims Saniger deliberately concealed the company's reliance on human workers by restricting access to automation metrics and instructing employees to keep the automation rate secret under the guise of protecting "trade secrets."
The Financial Times reported in 2022 that Nate's manual processing rates ranged between 60 and 100 percent during 2021. The company reportedly ran out of money and sold its assets in January 2023, resulting in "near total" losses for investors.
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