Albert Saniger, founder and former CEO of the AI shopping app Nate, has been charged with defrauding investors, according to a press release from the U.S. Department of Justice. Nate, established in 2018, attracted over $50 million from prominent investors, including Coatue and Forerunner Ventures, and in 2021 secured a $38 million Series A funding round led by Renegade Partners. Nate aimed to provide users with a seamless shopping experience, allowing purchases from any e-commerce site with a single click using AI technology. However, the DOJ alleges that the app relied significantly on hundreds of human contractors from a call center in the Philippines to manually process these purchases.
Saniger raised millions by claiming Nate operated online transactions “without human intervention,” noting that only edge cases required human help. Yet, the DOJ asserts that the app’s actual automation rate was effectively zero, despite the company’s efforts to acquire AI technology and hire data scientists. Research conducted by The Information in 2022 revealed Nate’s reliance on human contractors, raising concerns about the company’s practices. Saniger has not responded to requests for comment regarding the charges, nor has Buttercore Partners, the New York venture capital firm where he is currently listed as a managing partner.
The indictment states that Nate ran out of funds and was compelled to sell its assets in January 2023, leaving investors with significant losses. Saniger’s LinkedIn profile indicates he stepped down as CEO in 2023. This case highlights a troubling trend within the start-up ecosystem, where companies exaggerate their AI capabilities. Other companies, such as an AI drive-through software startup and EvenUp, a legal tech unicorn, have also faced scrutiny for relying heavily on human labor rather than advanced automation.