I recently came across a shocking case that highlights the dark side of the AI boom. Albert Saniger, the founder and former CEO of Nate — an app that promised to revolutionize online shopping with artificial intelligence — has been charged with fraud by the U.S. Department of Justice. The reason? His so-called AI app was allegedly run by humans, not algorithms.
Nate’s Big AI Promise: A Universal Checkout for E-Commerce
Founded in 2018, Nate attracted serious venture capital, raising over $50 million from high-profile investors like Coatue and Forerunner Ventures. In 2021, they secured a $38 million Series A round led by Renegade Partners.
The app was marketed as an AI-powered universal checkout tool, allowing users to buy from any e-commerce site with a single click. It sounded futuristic and game-changing — but the truth was far from it.
DOJ Investigation Reveals the Shocking Truth
According to the U.S. Department of Justice’s Southern District of New York, Nate’s claims of AI-driven automation were essentially smoke and mirrors. Behind the scenes, the app relied almost entirely on a team of human contractors based in the Philippines to manually complete the checkout process.
The DOJ alleges that Albert Saniger deceived investors by promising a product that “transacted online without human intervention,” except for rare exceptions. But internal evidence showed the automation rate was close to zero, despite hiring data scientists and acquiring some AI-related tech.
Nate’s Collapse and Investor Fallout
Nate reportedly ran out of cash and sold off its assets by January 2023, leaving investors with what the DOJ calls “near total” losses. Saniger had already stepped down as CEO by that time, as per his LinkedIn profile.
Interestingly, this wasn’t a completely unknown issue. A 2022 investigation by The Information had already raised questions about the app's reliance on manual labor.
As of now, Saniger serves as a managing partner at New York-based VC firm Buttercore Partners, which has yet to issue a public response.
The Larger Trend of Fake AI in Startups
Unfortunately, Nate’s story isn’t unique. In 2023, The Verge reported on an “AI” drive-through startup that also used humans in the Philippines to simulate artificial intelligence. More recently, Business Insider exposed EvenUp, an AI legal tech unicorn, for heavily depending on manual labor as well.
As someone who’s passionate about responsible tech, these cases concern me deeply. AI has incredible potential, but fake claims not only mislead investors — they also erode trust in legitimate innovation.
This story serves as a stark reminder: just because something is branded as “AI” doesn’t mean it truly is. As fintech founders race to ride the AI wave, due diligence becomes more critical than ever — not just for investors, but for everyday users who believe in the promise of technology.
I’ll be following this case closely, and I urge anyone in the startup space to be transparent and ethical about their use of technology. Let’s build a future we can actually trust.
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