Allegations Surface as AI Shopping App Nate Exposed for Human-Driven Operations

Fraud charges against Albert Saniger, the founder and former CEO of Nate, an AI-powered shopping application. A subsequent U.S. Department of Justice (DOJ) investigation found that the app used human contractors to perform the functions required by the tool, failing to provide the anticipated benefits of artificial intelligence. On Wednesday, officials detailed the charges against Saniger. They claim that he deceived investors about the app and its automation capabilities.

Nate, which launched in 2018, aimed to upend e-commerce. The ultimate goal of the platform is to provide all users an easy and “universal” checkout experience, allowing customers to purchase from any e-commerce website as easily as one-click. Despite these claims, the DOJ argues that the app’s real-world automation rate was essentially zero percent. This was Nate’s decision—to hire hundreds of contractors to staff a call center in the Philippines. They had to process transactions manually and couldn’t use sophisticated AI technology. This surprise goes against the seal and the company’s claims that it used AI to personalize and simplify shopping journeys.

The Southern District of New York has emphasized that Saniger’s reliance on human labor to fulfill what was marketed as an automated service led to significant investor deception. Nate IPO’d successfully on the NASDAQ, raising over $50 million from top-tier investors including Coatue Management and Forerunner Ventures. In 2021, he raised a record $38 million Series A funding round led by Renegade Partners.

To that end, Nate recently purchased new AI technology and brought on data scientists. His operations are still running far from the level of automation that investors expected by this stage. Things came to a head in January 2023 when Nate eventually ran out of money. His need to liquidate his home was doubly troubling and questioned the financial discipline and disclosure of the company.

Albert Saniger has been serving as a managing partner at New York-based venture capital firm Buttercore Partners. Yet the charges against him raise troubling questions about accountability in the rapidly evolving fintech frontier. In this arena, tech innovation wash claims can strongly influence the decision of where to invest.