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In the world of technology, exaggerating the capabilities of a product is pretty much the norm. But when one app company managed to raise millions of dollars in investments on the promise that it would be fully automated via AI, the US Department of Justice charged its former CEO with fraud because it turns out that the actual ‘AI’ was in fact several hundred call centre workers instead.
The company in question is Nate, which started in 2018 and rapidly amassed over $50 million in investments, according to TechCrunch. It did this because the company’s product, a universal shopping phone app, was claimed to use AI to fully automate the whole buying process.
Nate’s gist is that you would see a product you like, click a button, and machine learning will then sort out the transaction for you—including picking the right version of the product, payment details, and shipping.
However, an investigation by The Information (via TechSpot) showed that AI wasn’t used at all—in fact, it was just call centre workers in countries such as Romania and the Philippines that would be furiously clicking away behind the scenes.
While there is an element of comedy to all of this, the law in many countries around the world has a word for this sort of thing, and the founder of Nate has indeed now been charged with fraud. The US Department of Justice was less than amused by the actions of Nate and its founder and CEO at the time, Albert Saniger, last week charging him for “making false claims about his company’s artificial intelligence technology.”
Specifically, the FBI’s Christopher G. Raia had this to say about the former CEO: “Albert Saniger allegedly defrauded investors with fabrications of his company’s purported artificial intelligence capabilities while covertly employing personnel to satisfy the illusion of technological automation. Saniger allegedly abused the integrity associated with his former position as the CEO to perpetuate a scheme filled with smoke and mirrors.”
Saniger has been charged with one count of securities fraud and one of wire fraud, both of which carry maximum penalties of up to 20 years in prison.
Along with The Information’s investigation of Nate, the fact the company ran out of money a few years ago, requiring it to sell off most of its assets, leaving investors high-and-dry, was probably what brought the app company into the gaze of the Department of Justice and FBI.
This isn’t the first use of a claimed AI technology being nothing more than real humans beavering away behind the scenes and it certainly won’t be the last. But it’s a cautionary tale that, like with all things technology-wise, any marketing claims should be viewed with a wary eye unless indisputable evidence of it working as promised is handed over.
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Kurt Indovina
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