Introduction
On April 9, 2025 [1] [3], the SEC and the US Attorney’s Office for the Southern District of New York launched civil and criminal enforcement actions against Albert Saniger [3], the founder and former CEO of Nate Inc [1] [3]. The actions allege that Saniger misled investors about the company’s use of artificial intelligence in its mobile shopping application [2], raising significant funds under false pretenses.
Description
On April 9, 2025 [1] [3], the SEC and the US Attorney’s Office for the Southern District of New York initiated civil and criminal enforcement actions against Albert Saniger [3], the founder and former CEO of Nate Inc. [1] [3], for allegedly misleading investors about the company’s use of artificial intelligence in its mobile shopping application [2]. Saniger is accused of raising over $42 million by falsely claiming that Nate utilized advanced AI technologies [2], including machine learning and neural networks [1] [2] [3]. However, investigations revealed that transactions were primarily processed manually by overseas contract workers [1] [3].
The SEC and DOJ allege that Saniger misled investors during fundraising rounds from 2019 to 2022 [1] [3], falsely asserting high automation rates and orchestrating deceptive product demonstrations [3]. The SEC’s complaint states that the app’s automation was essentially nonexistent [3], and any technology incorporated was far less advanced than promised [3]. Following a June 2022 report that challenged Nate’s AI claims, the company ceased operations in January 2023 [3], resulting in significant losses for investors.
The SEC has charged Saniger with multiple violations of federal securities laws [1] [3], including Section 10(b) of the Securities Exchange Act of 1934 and Section 17(a) of the Securities Act of 1933 [1] [3]. The agency seeks disgorgement [1], civil penalties [1] [3], and a permanent injunction against future violations [1] [3]. Additionally, the DOJ has charged him with securities fraud under Section 10(b) of the Exchange Act and Rule 10b-5 [2], as well as wire fraud, each carrying a potential 20-year prison sentence [1] [3], along with forfeiture of proceeds from his alleged offenses [1] [3].
These cases mark the first enforcement actions related to “AI-washing” under the current administration [2], underscoring the federal government’s commitment to investor protection and the importance of transparency in AI-related claims [2]. Companies are advised to carefully assess their representations regarding AI capabilities to avoid misleading investors [2].
Both the SEC and DOJ cases are in the early stages [3], with the SEC facing challenges in serving Saniger [1] [3], who resides in Spain [1] [3]. An extension has been granted for the SEC to attempt service [3], with a status report due by July 8, 2025 [3]. As of now [1], no responsive pleadings have been filed [1].
Conclusion
These enforcement actions highlight the federal government’s dedication to safeguarding investors and ensuring transparency in AI-related claims. The cases serve as a cautionary tale for companies to accurately represent their technological capabilities, emphasizing the potential legal and financial repercussions of misleading investors. As the proceedings unfold, they may set precedents for how AI-related misrepresentations are handled in the future.
References
[1] https://www.jdsupra.com/legalnews/sec-and-doj-warm-up-to-enforcement-over-3503810/
[2] https://www.kmklaw.com/newsroom-publications-1762
[3] https://www.lexology.com/library/detail.aspx?g=e7d1ad59-8cfd-4b80-8c87-64939cf234d0
