Do Not Entrust Your Child or Mental Health to This Robot
I mean, if Megi Kavtaradze had been telling the truth it would have been pretty cool. Her company, Destiny Robotics, is an AI and robotics company that claimed it was developing a “socially intelligent” humanoid hologram and a robot to serve as an at-home personal assistant and companion. That sounds very cool, and I bet people would pay a lot of money for it. Because it didn’t turn out that way, the SEC got mad and sued them last month in the Southern District of Florida. (The facts that follow are from a settled case, so they’re really just allegations.)
Destiny Robotics isn’t publicly traded, but Kavtaradze tried to do some crowdfunding for it, offering investors simple agreements for equity (SAFEs) in the first half of 2022.
What She Said
Here’s what she said out loud in different media starting in July 2021:
Destiny was developing next-generation technology that would produce the world’s first humanoid robot capable of serving as an at-home assistant and companion.
Destiny expected to launch a humanoid hologram into the market in 2022 and a humanoid robot in 2023.
The robot would use AI to:
“understand[] and respond[] to human emotions, allowing for personalized interactions and companionship ultimately reducing loneliness and promoting mental well-being.”
“perform tasks” and assist with child-care, elderly care, psychological therapy, and crisis management.
This is what the robot looked like in these early, hopeful days:
What Was Really Happening
Sadly, the robot and hologram turned out not to be everything Kavtaradze had cracked them up to be. The hologram was limited to weak AI functions using commercially available software. Kavtaradze decided to abandon it, but instead of telling investors that, kept using the bright prospect of the hologram to raise more money.
In February 2023, Destiny announced the completion of a first robot prototype, but it wasn’t the socially intelligent “humanoid” robot shown above. The actual “robot” was just a shoulder-up bust with a rotating, plastic shell head:
I’m not sure you could you do child care with that? The SEC is annoyed that this “shoulder-up bust robot prototype did not have human-like skin, legs, or arms . . . .” Like the hologram, the robot did not feature cutting-edge AI but used AI software widely available for purchase in the market. Also, for this prototype to power on and perform its basic functions, an individual needed to operate it with a remote control. Kavtaradze didn’t mention this part.
A Little Weird
This case is a little weird. Kavtaradze didn’t raise that much money, about $141,000. She used only about $13,000 of that for personal expenses. I would have guessed a much higher percentage given the AI subject matter and cartoonish quality of the robots at issue here. Kavtaradze is paying disgorgement of the $13,000 plus prejudgment interest and a civil penalty of $50,000. As far as the rest of the money she raised, maybe because it largely came from an investor she was in a relationship with, the SEC seems to be letting it go. She and Destiny are also settling to negligence-based charges under Section 17(a)(2) and (3) of the Securities Act and not big boy fraud under Rule 10b-5. The misrepresentations here don’t seem like accidents, but here we are.
Some may call this an AI-washing case, and maybe it is. But it’s really just an old-fashioned securities fraud case. The AI cases may get more sophisticated soon but it’s still early days and we’re not there yet.
Start-Up AI and Robotics Company and CEO Settle SEC Charges, SEC Lit. Release (Oct. 15, 2024)