The former CEO of the fintech app Nate has been charged with fraud for allegedly making misleading claims regarding the app’s artificial intelligence capabilities. The FBI has indicated a reverse scenario to the usual AI narrative, alleging that human effort replaced what was claimed to be automated by AI.
A press release from the U.S. Attorney’s Office for the Southern District of New York reveals that Albert Saniger has been indicted for defrauding investors. Acting U.S. Attorney Matthew Podolsky stated that Saniger is accused of exploiting AI’s allure to create a deceptive narrative of non-existent innovation.
Government attorneys assert that Nate claimed to use AI technology to facilitate the e-commerce checkout process. However, it is alleged that the company employed human contractors in the Philippines to perform this work. Saniger reportedly raised over $40 million from investors by this means.
FBI Assistant Director in Charge Christopher G. Raia commented on the case, stating that Nate heavily depended on overseas human teams to manually process transactions while maintaining a facade of automation. Raia further explained that Saniger hired numerous contractors in a Philippine call center to manually execute purchases through the Nate app.
The rise of AI technology has sparked questionable startup practices where some entrepreneurs market their applications based on anticipated technological advancements. The article highlights that Nate is not alone in facing such allegations; other startups, including Presto and EvenUp, have also been criticized for claiming AI automation while relying on human labor.
The AI industry is often touted for its potential to lower labor costs and enhance efficiency, attracting venture capitalists, especially during the e-commerce boom fueled by the pandemic. An indictment claims that Saniger hid the app’s minimal automation level from investors by considering it a “trade secret.”
Saniger is charged with securities fraud and wire fraud, each carrying a possible maximum prison sentence of 20 years. Efforts to reach Saniger for comment are ongoing, and updates will be provided upon receiving a response.
