US tech CEO charged for claiming AI but using PH manpower instead

The former head of a fintech startup in the United States has been indicted for making false claims about the company, allegedly claiming its app uses artificial intelligence (AI) but actually using manpower from the Philippines, federal prosecutors said. 

Albert Saniger, the former chief executive officer of e-commerce firm Nate, Inc (or nate), raised over $40 million after he “repeatedly” told investors that the nate app used proprietary AI technology to autonomously complete online purchases on behalf of customers, according to the US Attorney’s Office, Southern District of New York.

However, the federal court pointed out that nate’s use of AI was never effective. 

“As Saniger knew, at the time nate was claiming to use AI to automate online purchases, the app’s actual automation rate was effectively zero percent. Saniger concealed that reality from investors and most nate employees: he told employees to keep nate’s automation rate secret; he restricted access to nate’s ‘automation rate dashboard,’ which displayed automation metrics; and he provided false explanations for his secrecy, such as the automation data was a ‘trade secret,’” the indictment read. 

“In truth, nate relied heavily on teams of human workers—primarily located overseas—to manually process transactions in secret, mimicking what users believed was being done by automation. Saniger used hundreds of contractors, or “purchasing assistants,” in a call center located in the Philippines to manually complete purchases occurring over the nate app,” the document further read. 

The federal prosecutors also alleged that after creating the bots, Saniger used bots in addition to the manual workers to complete the purchases. 

Matthew Podolsky, acting US Attorney for the Southern District of New York, said that they will continue to pursue those who seek to defraud investors. 

“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 victimizes innocent investors, it diverts capital from legitimate startups, makes investors skeptical of real breakthroughs, and ultimately impedes the progress of AI development,” he said in a statement. “This Office and our partners at the FBI will continue to pursue those who seek to harm investors by touting false innovation.” 

Likewise, the Federal Bureau of Investigation also slammed Saniger’s actions. 

“Saniger allegedly abused the integrity associated with his former position as the CEO to perpetuate a scheme filled with smoke and mirrors. The FBI will continue to investigate any business owner who withholds material information to encourage additional investments,” said FBI Assistant Director in Charge Christopher Raia in a statement. — BM, GMA Integrated News