/artificial intelligence

News and resources on artificial intelligence systems, innovations and initiatives worldwide.

Nate founder charged with fraud over 'AI' shopping app secretly powered by humans

The founder of an AI-based tool for automating online shopping checkouts has been charged with defrauding investors over claims that the process was actually carried out by human workers in the Philippines.

  1 1 comment

Nate founder charged with fraud over 'AI' shopping app secretly powered by humans

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

Founded in 2018, the nate app boasted that AI enabled it to help users buy a product from any e-commerce site with the click of a button, acting as a universal shopping tool.

The firm raised tens of millions of dollars in funding, including a 2021 $38 million Series A round led by Renegade Partners and joined by Forerunner Ventures, Canaan Partners and Coatue Management.

According to the DoJ, it ran out of funds and was forced to sell its assets in early 2023, leaving investors with "near total" losses.

Former nate CEO Albert Saniger now faces an indictment from the Department of Justice’s Southern District of New York charging him with engaging in a scheme to defraud investors and prospective investors by making false and misleading statements about the firm's "use of proprietary AI technology and its operational capabilities".

According to the DoJ, Saniger touted nate's use of AI to investors, claiming it was “able to transact online without human intervention” except in certain "edge cases".

In reality, says the DoJ, nate did not use AI to autonomously navigate the checkout process. While Saniger acquired AI technology from a third party and hired a team of data scientists to develop it, the tech never achieved the ability to consistently complete e-commerce purchases.

In fact, "the app’s actual automation rate was effectively zero percent". Saniger is accused of keeping this from not only investors but most employees, restricting access to nate’s “automation rate dashboard".

In truth, nate relied on hundreds of contractors, or “purchasing assistants,” in a call centre located in the Philippines to manually complete purchases occurring over the nate app.

Saniger - now listed as a managing partner at VC Buttercore Partners - is charged with one count of securities fraud, which carries up to 20 years in prison, and one count of wire fraud, which also carries a maximum sentence of 20 years.

Acting US Attorney Matthew Podolsky says: “As alleged, Albert Saniger misled investors by exploiting the promise and allure of AI technology to build a false narrative about innovation that never existed.

"This type of deception not only victimises innocent investors, it diverts capital from legitimate startups, makes investors skeptical of real breakthroughs, and ultimately impedes the progress of AI development."

Sponsored [Webinar] Solving procurement challenges with Embedded Payments

Comments: (1)

A Finextra member 

Humans having difficulty translating intelligence into practical abilities is not a new thing.....  Genius requires both....   heres what AI told me on Google 

1. Intelligence vs. Achievement:
  • Correlation: Intelligence is a significant predictor of academic success and achievement. 
     
  • Not a Guarantee: High intelligence doesn't automatically translate into high achievement. 
     
  • Other Factors: Various factors, including motivation, learning styles, and socio-cultural circumstances, can influence how well intelligence is used to achieve goals. 

I would add 'Application of learning and intelligence' to the above...  Application appears to have needed the 'application of a call center' to work

[Webinar] AI in the wrong hands: Exploring modern cybersecurity concernsFinextra Promoted[Webinar] AI in the wrong hands: Exploring modern cybersecurity concerns