Nate, a startup that promised AI-powered shopping, turns out to be secretly powered by hundreds of humans in the Philippines

Last year, Amazon got busted for claiming its cashier-free stores were powered by AI—when they were actually run by low-wage workers in third countries. Now a VC-backed startup is under fire for the same thing: pretending humans were AI by using a shopping app and a hidden call center in the Philippines.

Nate, a startup founded in 2018, raised over $50 million in funding by claiming it built a seamless AI-powered shopping app. The company promised users they could buy anything online with a single tap, skipping checkout entirely thanks to artificial intelligence. But according to federal prosecutors, the whole thing was a front.

AI Smoke and Mirrors: Startup Nate Faked AI with a Call Center in the Philippines

Instead of AI quietly handling transactions, Nate allegedly relied on hundreds of human workers in a call center in the Philippines to manually place orders for users. The Department of Justice has charged Nate’s founder and former CEO, Albert Saniger, with securities fraud and wire fraud, accusing him of misleading investors and faking the company’s core technology.

In an indictment unsealed by the DOJ’s Southern District of New York, investigators say Saniger sold investors a vision of full automation while hiding the fact that nearly every transaction was processed by hand.

FBI Assistant Director in Charge Christopher G. Raia didn’t hold back in a statement:

“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.”

A $50M Illusion

Saniger pitched Nate as an “AI-first” universal shopping cart that worked on any retail site. The pitch was simple: find a product online, tap “buy” in the Nate app, and the AI would handle everything—from picking the right size to inputting your shipping details.

That promise helped Saniger raise a $38 million Series A round led by Renegade Partners, with additional backing from Coatue and Forerunner Ventures.

But prosecutors say the technology never worked as advertised. Internally, the company’s own automation dashboard reportedly showed a near-zero success rate. Despite this, Saniger continued to claim Nate was almost fully automated—downplaying any human involvement as rare “edge cases.”

Behind the scenes, Nate had built out a hidden human workforce. Hundreds of contractors in a Philippine call center, referred to as “purchasing assistants,” manually completed the transactions. During the peak holiday season in 2021, Saniger even directed engineers to build bots to speed up some orders—despite previously dismissing bots as “dumb.”

Facing Prison Time

Saniger, 35, is now facing two federal charges, each carrying a potential 20-year sentence. The FBI and the U.S. Securities and Exchange Commission are both involved in the investigation. The SEC has filed a parallel civil action.

Prosecutors say Saniger misled investors about the company’s use of AI to raise over $40 million. They also allege he actively restricted access to internal automation metrics and told employees the data was a trade secret.

Acting U.S. Attorney Matthew Podolsky summed it up this way:

“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.”

The case is being handled by the Securities and Commodities Fraud Task Force and the Complex Frauds and Cybercrime Unit in Manhattan.