A former AI founder is set to face criminal charges after it was found that his supposed artificial intelligence platform was powered by human operators.Albert Saniger, the former chief executive of e-commerce startup “nate” is facing securities fraud and wire fraud charges after it was alleged he sold his investors on an AI-powered online shopping tool.Attorneys in the New York Southern District found that Saniger raised some $40 million in startup funding from investors on the promise that his online shopping cart tool was running on innovative AI technology that could automate the process of checking out and paying for goods on behalf of customers.In reality, prosecutors said, the 35 year-old Barcelona resident, was relying on manpower to run the tool, employing remote workers in the Philippines to carry out the retail transactions by hand.It is alleged while he acknowledged some manual intervention, Saniger would excuse the use of human operators as a rare occurrence for specific cases and that vast majority of transactions were being powered by AI automation.The truth was not only concealed from the company’s investors, but even many of its own employees.“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,” prosecutors said in announcing the charges.“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.”Now, in addition to losing his company, Saniger could face up to 20 years in prison for each of the two fraud charges along with fines.“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,” said Matthew Podolski, acting U.S. Attorney for the Southern District of New York.“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 charges will come as little consolation to Saniger’s defrauded financial backers, who have become the latest victims of a phenomenon known as “AI-washing.”Seeking to ride the wave of hype (and the money that comes with it) some companies have been known to vastly overstate their AI capabilities and, in some cases, flat out lie about their use of the technologies. The SEC and DOJ have been stepping up their efforts to enforce fines and charges against companies that use the lure of AI to mislead investors, however. In addition to this week’s charges against Saniger for fraud, other companies have been slapped with six-figure fines for overstating their AI capabilities.
