The U.S. startup secretly employed hundreds of workers in the Philippines to handle the orders manually.

Albert Saniger, CEO of Nate, a U.S. fintech startup that had raised over $50 million with promises of AI-driven shopping, used hundreds of human workers in the Philippines to secretly handle transactions instead of automating them.

Federal prosecutors have charged the man with securities and wire fraud, revealing that the app’s touted AI was nothing more than a front.

Nate, founded in 2018 in New York, pitched itself as the solution to a seamless, AI-driven shopping experience. The app promised users that they could complete online purchases in one tap, with AI handling everything from selecting the right product size to managing payment details.

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Investors who bought this vision poured more than $50 million into Nate, with firms like Coatue, Forerunner Ventures, and Renegade Partners among contributors.

The U.S. Department of Justice says in a press release it is investigating Nate in cooperation with the Federal Bureau of Investigation (FBI) for running an investment fraud scheme as Saniger misled investors about the extent of AI’s role in the company, continuing to tout the technology’s capabilities while hiding the near-zero success rate of automation.

“Nate’s 'AI' was more like smoke and mirrors. […] 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.”

Internal company dashboards reportedly showed that Nate’s automated system had almost no functionality, despite claims that it was running without human intervention, except in rare edge cases.

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Behind the scenes, the app’s backend was operated by "purchasing assistants" who manually fulfilled the orders. In fact, during peak shopping seasons like the holidays, the company ramped up human labor even further, with engineers directed to build bots to speed up the process.

However, these bots were never intended to replace the human workforce — they were simply used to manage some of the work faster.

The 35-year-old CEO is facing two federal charges of securities fraud and wire fraud, each of which carries a potential 20-year prison sentence. The U.S. Securities and Exchange Commission has also filed a parallel civil suit.

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