Smoke, Mirrors, and Humans: The Rise of Fake AI

AI is transforming industries—but not always in the way you might expect. Instead of AI impersonating humans, a new wave of scandals highlights a darker, almost ironic twist: companies that claim to use AI… but secretly rely on human labor, deception, or underdeveloped tech behind the scenes.

Like the original Mechanical Turk, aka Automaton Chess Player, that fooled audiences across Europe in the 18th century into thinking a machine could beat human players of chess, when there was actually a hidden person inside. It took another 200 years before IBM’s Deep Blue would actually beat Garry Kasparov in 1996.

From startup fraud charges to government crackdowns, it’s becoming clear that “AI-washing” is the new greenwashing, or at least a way to raise venture funds without developing working code..

Recent Signals in the Market:

• 🛒 CEO charged after "AI-powered" shopping app Nate used human workers instead of AI.
  Gizmodo →
  
  

• 🏛️ Bay Area startup CEO of YouPlus sentenced to prison for AI fraud.
  SFGate →
  
  

• 🚨 FTC launches a new initiative to crack down on AI companies making deceptive claims.
  NextGov →
  

Trust, But Verify

AI hype is booming—and so are fake claims about AI capabilities. In a market obsessed with automation, some companies are cutting corners, using old-fashioned human labor while marketing themselves as cutting-edge innovators.Nate and YouPlus are unlikely to be the last to be caught for marketing fake or grossly exaggerated AI capabilities. 

But regulators, investors, and users are catching on. As the Federal Trade Commission’s new initiative shows, trust in AI will increasingly depend on transparency—and a more than little healthy skepticism.

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