A former tech CEO has been accused of fraud after misleading investors and customers about the technology behind his e-commerce startup.
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Albert Saniger, the ex-CEO of the shopping app Nate, is facing charges for telling people his company used artificial intelligence (AI) to power its checkout process. However, the Justice Department says there was no AI at all. Instead, the work was done manually by people in the Philippines and Romania.
Nate was marketed as a simple way for shoppers to buy items without having to go through the usual checkout steps. The app claimed to use AI to handle all transactions. But investigators say the technology didn't work as promised. It couldn't process purchases on its own. So, Saniger allegedly hired hundreds of contractors to complete the transactions by hand.
The U.S. Attorney's office says Saniger misled investors with these false claims about AI. This kind of deception, they argue, harms innocent investors and could hurt the progress of real AI technology.
The indictment also notes that, while the app did use some bots to help automate a few tasks, it didn't rely on the AI-powered system that was advertised.
Saniger now faces serious charges, including securities fraud and wire fraud. Each charge could bring up to 20 years in prison.
This case highlights the risks of misleading claims in the tech world, especially around AI.