In the first artificial intelligence (AI)-washing enforcement cases brought by the SEC and U.S. Department of Justice (DOJ) under the Trump Administration, on April 9, 2025, the SEC and the U.S. Attorney's Office for the Southern District of New York filed parallel actions against Albert Saniger, the founder and former CEO of Nate Inc. (Nate), alleging that he made false and misleading statements to investors about Nate's purported AI technology.1
Saniger marketed Nate as a cutting-edge mobile shopping app that worked "like magic" using AI, machine learning and neural networks. But according to the SEC and DOJ, that was a lie, and the transactions were allegedly being processed manually by contract workers in foreign countries.
Through a series of alleged misrepresentations, Saniger raised more than $42 million over three years. Following the publication of a news exposé that cast doubt on Nate's AI capabilities, the company collapsed. Not long after, the SEC and DOJ filed suit seeking to hold Saniger liable for securities fraud allegedly resulting in tens of millions of dollars of losses to Nate's investors.
Background
Saniger founded Nate in 2018 with the goal of creating an app that could streamline the online shopping experience for consumers across the globe. The concept was novel, yet simple: "buy what you wish in a tap." Rather than manually navigating through checkout pages, consumers could simply click "buy," with Nate's AI technology handling the rest.
However, despite Saniger's claims about Nate's advanced AI capabilities, he allegedly knew the app's core feature, its automation, was a sham. According to the SEC, instead of one-click checkouts, the Nate app rerouted orders to overseas contract workers who manually completed each purchase, just as consumers would.
The SEC claims Saniger defrauded investors during two rounds of fundraising from at least the spring of 2019 through December 2022 by misrepresenting Nate's capabilities in pitch materials and orchestrating deceptive product demonstrations, in which Saniger instructed Nate engineers to be on standby to complete test purchases. The SEC further alleges Saniger knew the app lacked any functional AI model, yet he continued to tout high automation rates to investors.
Saniger also allegedly fabricated the Nate app's success metrics, claiming automation rates above 90 percent, but the automation rate was "essentially zero." Even after Nate began incorporating some technology, the SEC's complaint alleges that Nate relied on automated "bots" that were far less advanced than the AI Saniger promised to investors, crashing and failing at minor website changes.
After a June 2022 news report questioned Nate's AI claims, Saniger was unable to secure additional funding, and the company ceased operations, formally dissolving in January 2023 and leaving investors still looking for the "magic" Saniger claimed Nate offered.
Charges
The SEC has charged Saniger with multiple violations of federal securities laws arising from his alleged misrepresentations in connection with the offer and sale of Nate's securities. Specifically, the SEC has charged Saniger with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Section 17(a) of the Securities Act of 1933.
Based on these alleged violations, the SEC seeks disgorgement, civil money penalties, a permanent injunction barring Saniger from future violations of the federal securities laws and a lifetime director and officer bar.
Like the SEC, the DOJ alleges securities fraud against Saniger and one count of wire fraud. Each charge carries a maximum sentence of 20 years in prison. The DOJ also seeks forfeiture of all proceeds derived from Saniger's offenses.
Acting U.S. Attorney Matthew Podolsky made clear that regulators will take aggressive action against AI washing, noting that the DOJ and FBI "will continue to pursue those who seek to harm investors by touting false innovation" because 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."
Status
Both the SEC's and DOJ's actions against Saniger remain in the early stages. In the SEC's case, the agency has not yet been able to serve Saniger with the complaint, apparently because he resides in Spain. In a May 21, 2025, letter motion, the SEC requested an extension of preliminary deadlines to attempt to effectuate service on Saniger abroad. The court granted the extension request, giving the SEC until July 8, 2025, to submit a status report. As of the date of this article, the SEC has not filed a status report or proof of service and no responsive pleadings have been filed.
Despite its tough talk on enforcement against AI washing, there has been even less activity in the DOJ's case against Saniger. The only filing is the indictment. There are no scheduled hearings or pending motions and pending service on Saniger, these actions remain dormant.
Holland & Knight continues its SECond Opinions Blog Summer Series featuring posts written and researched by the associates from our Securities Enforcement Defense Team. This blog comes from Houston Associate Katia Leiva, who focuses her practice on complex commercial litigation and dispute resolution in the healthcare, maritime, employment and consumer financial services industries.
Notes
1 See SEC v. Saniger, No. 25-cv-02937 (S.D.N.Y. filed Apr. 9, 2025); United States v. Saniger, No, 25-cr-00157 (S.D.N.Y.).
