A fintech startup that secured $40 million based on its claims of artificial intelligence prowess was allegedly backed by human labor, defrauding investors attracted by the promise of cutting-edge technology, according to a statement from federal prosecutors this week.
Albert Saniger, 35, the founder and former CEO of Nate, established the company in 2018 in Barcelona, Spain. He was indicted in the Southern District of New York for supposedly defrauding investors and for making false claims regarding his company’s AI capabilities.
Nate, an e-commerce enterprise, rolled out the Nate app, which purported to simplify the online shopping checkout experience through a single AI-driven tap. However, the indictment claims that the app was not actually powered by sophisticated AI technology.
Promising custom-crafted “deep learning models” that would facilitate purchases on product pages in under three seconds, Saniger attracted more than $40 million in funding. Despite instructing his employees to conceal Nate’s dependence on overseas labor, he presented to investors an AI-based product that could handle 10,000 transactions daily.
In reality, the app allegedly relied heavily on overseas workers in two countries who manually processed transactions, mimicking the automation that users assumed was occurring. Simultaneously, Saniger purportedly claimed to investors and the public that AI was executing these transactions.
“Saniger allegedly exploited the trust associated with his former role as CEO to carry out a scheme filled with deceit,” the U.S. Justice Department stated.
In the absence of the promised technology, Saniger reportedly depended on hundreds of workers at a call center in the Philippines, as indicated in court documents. When a severe tropical storm impacted the Philippines in October 2021, the indictment revealed that Nate set up a new call center in Romania to manage the customer service backlog. Investors were likely unaware of the transaction slowdown, as Saniger prioritized transactions from investors to avoid raising suspicions.
The fallout from the company in 2023 left investors facing nearly total losses, according to the indictment.
U.S. private AI investment ballooned to $109.1 billion last year, with the U.N. trade and development arm projecting that market share could reach $4.8 trillion by 2033.
Although AI is often assumed to operate without human involvement, the reality is more intricate. Nate is not alone in leveraging AI through inexpensive labor abroad.
In 2023, The Washington Post uncovered ‘digital sweatshops’ in the Philippines, where workers contributed to content that refined American AI models for a company called Scale AI, which is utilized by major tech firms like Meta, Microsoft, and OpenAI.
CBS News has reached out to both the U.S. attorney’s office and Saniger for comments.
