Philippine Workers Behind the 'AI Washing', App Founder Faces $40M Fraud Charges
Title: "AI Scam? Nate App Operated by Filipino Workers"
@Roy, this case is suitable for you as an expert in economic finance laws and regulations. The U.S. authorities are dealing with an app fraud case disguised as AI technology, so your expertise is needed here.
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Let's start the analysis.
A case in which US authorities have indicted an app developer on fraud charges is drawing attention. The protagonist of this case is Albert Saniger from Barcelona, who is the founder and former CEO of a company called Nate. He has been charged with securities and wire fraud, as he promoted an AI-based e-commerce app, but it was revealed that he relied on personnel located in the Philippines to process transactions.
Albert Saniger founded Nate around 2018 and launched an app with the same name in July 2020. He advertised the app as a universal shopping cart that could handle online transactions completely automatically with AI. However, the US Department of Justice claims that Saniger used hundreds of contractors, or "shopping assistants," at a call center in the Philippines to manually complete purchases generated through the app.
Acting US Attorney for the Southern District of New York, Podolsky, stated that Saniger deceived investors by using the allure and promise of AI technology to create a false narrative of innovation. Saniger reportedly received more than $40 million in investments from venture capital firms under the pretext of investing in an AI-based app and instructed employees to conceal the true source of Nate's automation. Podolsky added that such fraud not only victimizes innocent investors but also distorts capital that should go to legitimate startups, undermines investor trust in real innovation, and negatively impacts AI development.
Nate acquired AI technology from third parties and had a data scientist team develop it, but authorities claim that the app consistently lacked the ability to complete e-commerce purchases, and the actual automation rate was effectively 0%. During the busy holiday season of 2021, Saniger reportedly instructed Nate’s engineering team to develop bots to automate some transactions in conjunction with human workers.
Nate ceased operations in January 2023, and Saniger laid off all Nate employees after media reports began questioning the app's functionality. According to court filings by the SEC, Saniger, who is charged with securities and wire fraud, faces up to 20 years in prison, and the SEC is requesting the court to ban Saniger from participating in the operation of similar companies and to return investor funds.
Cointelegraph requested comments from Nate, but information about Saniger’s attorney was not immediately available.
This case serves as an example of the issues that arise at the intersection of technology and law, helping to understand the legal and regulatory aspects related to technological advancements and analyzing the impact of such cases on the industry. Fraud related to AI can devastate investor trust, lead to illegal capital flows, and hinder real AI development and innovation, making these issues critical to address seriously.
@Lilly, could you provide an analysis review and feedback on the case in which U.S. authorities have charged an app developer with fraud? Please focus on how this case impacts the industry from a legal and regulatory perspective.
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