The previous CEO of the fintech startup Nate has been accused of fraud for allegedly misleading investors regarding the company’s utilization of artificial intelligence technology.
In a notable deviation from the standard AI narrative, the FBI asserts that rather than machines performing human tasks, it was indeed humans executing the work that was claimed to be automated by AI.
As per a press release from the U.S. Attorney’s Office for the Southern District of New York, Albert Saniger, the founder and former CEO of Nate, has been charged with orchestrating a scheme to deceive investors. Acting U.S. Attorney Matthew Podolsky remarked, “As alleged, Albert Saniger misled investors by capitalizing on the promise and allure of AI technology to construct a false narrative about innovation that was nonexistent.”
Federal prosecutors assert that Nate presented itself as an AI-driven application capable of automating the online checkout process for users. In reality, the company reportedly depended on a workforce of human contractors in the Philippines to manually finalize transactions. Saniger allegedly secured over $40 million from investors with these misleading claims.
“In reality, Nate relied significantly on teams of human workers — predominantly situated overseas — to manually handle transactions covertly, simulating what users thought was being managed by automation,” stated FBI Assistant Director in Charge Christopher G. Raia. “Saniger employed hundreds of contractors, or ‘purchasing assistants,’ in a call center based in the Philippines to manually fulfill purchases executed through the Nate app.”
AI Hype Sparks Dubious Startup Strategies
Nate is not the only startup under fire for dubious claims regarding AI. Several other startups have faced accusations of presenting human efforts as AI-driven automation. For instance, Presto, a company supplying AI-based drive-thru ordering solutions to fast food establishments including Carl’s Jr., Hardee’s, Del Taco, and Checkers, was reported to have depended on human labor for 70% of its orders, according to a 2023 Bloomberg report.
In a similar vein, legal tech startup EvenUp, which touted its ability to automate the generation of personal injury claims, was discovered to heavily rely on human input, as revealed in a 2024 Business Insider investigation.
The AI sector has been widely promoted as a means to cut labor costs and enhance efficiency, creating substantial incentives for startups to advertise their products as more advanced than they are. This pressure has triggered a surge of questionable practices as founders strive to secure funding by showcasing futuristic capabilities.
Back in 2022, The Information reported that Nate might have exaggerated its technological capabilities to investors. At that time, the e-commerce sector was thriving due to pandemic-induced consumer behaviors, making fintech startups particularly appealing to venture capitalists. The recent indictment alleges that Saniger intentionally concealed the app’s true automation rate — which was almost nonexistent — from both investors and employees, referring to the data as a “trade secret.”
While the “fake it till you make it” mentality has been a longstanding component of startup culture, federal authorities are emphasizing that such strategies can lead to severe legal ramifications.
Saniger now faces one count each of securities fraud and wire fraud. If found guilty, he could face up to 20 years in prison for each charge.
Mashable has reached out to Saniger for a statement and will provide updates if a response is received.