Builder.ai folds after it's revealed that its 'AI' was actually powered by hundreds of engineers

Builder.ai, a $1.5B startup, collapses after faking AI, reveals 100s of engineers.

: Builder.ai, once a pioneer valued at $1.5 billion and backed by firms like Microsoft, has collapsed after it was revealed that its AI was actually supported by hundreds of Indian engineers. This revelation led to the discovery of financial fraud involving inflated revenue projections, highlighting the company's deceptive practices, including the creation of fake invoices with VerSe Innovation. Founder Sachin Dev Duggal resigned amid financial chaos, leaving the company bankrupt and legally embroiled with creditors and regulatory investigations. The company's operations were characterized by manipulative public relations strategies, crafted to mask its human-driven processes under the guise of sophisticated AI solutions.

Builder.ai, a once-prominent AI-powered startup, announced its dissolution after a series of shocking disclosures unveiled the true nature of its operations. Contrary to its branding, which suggested extensive AI capabilities, the company's offerings were primarily supported by manual labor conducted by hundreds of engineers based in India. This operational model starkly contrasted with the marketed image of their AI system 'Natasha' as a fully autonomous software-building tool, creating a façade ultimately exposed by audits and whistleblower accounts.

The fraudulent activities extended beyond misleading advertising, encompassing significant financial improprieties. Builder.ai engaged in a round-tripping scheme with Indian firm VerSe Innovation, exchanging millions of dollars in invoices for nonexistent services between 2021 and 2024. Investigations revealed that these activities artificially inflated Builder.ai's financial standing by up to 300%, painting a far rosier picture for investors. The effect was catastrophic when independent audits revealed actual revenues far below the purported $220 million, tallying only $55 million for the year 2024.

This expose led to significant financial fallout. Companies like Microsoft, which had invested $455 million and had plans to integrate Builder.ai's technology with their Azure platform, suddenly found themselves amidst a cautionary tale of overhyped technological promises. Microsoft had to endure the failure of the partnership and the loss of its significant financial stake after creditors like Viola Credit seized funds due to inflated financials.

The scandal reached legal circles with the US Attorney's Office for the Southern District of New York investigating possible securities fraud. The scrutiny extended to the SEC, probing whether Builder.ai misled investors about its technological platform's capabilities. A cache of internal communications unveiled by investigators showed company brass instructing employees to conceal the extent of human labor in these ventures, prioritizing the public image focused on their 'proprietary AI'.

Significant executive movements followed these revelations. The company's founder, Sachin Dev Duggal, who once styled himself as Chief Wizard, vacated the CEO position in February 2025, relocating to Dubai amidst rising legal pressures. Successor Manpreet Ratia had to implement severe operational cuts, laying off approximately 80% of the workforce, amounting to about 1,000 employees globally. This collapse marks one of the most staggering failures since the advent of ChatGPT and signals growing scrutiny against AI misrepresentations across a burgeoning tech landscape.

Sources: TechSpot, Bloomberg

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