AI Startup That Went Bust Was Allegedly Actually Indians and May Have Inflated Revenue Too
Oh no, not this again!
This story is making the rounds today and it’s highly relevant to the audience not just because AI is being shoved down everyone’s throats including accountants’. You’ll see why in a minute. First, the quick story of what’s happening with Builder.ai:
😃 The Natasha neural network turned out to be 700 Indian programmers
The startup BuilderAI offered to write any application, like in a constructor, by selecting the necessary functions.
In reality, customer requests were sent to the Indian office, where 700 Indians wrote code… pic.twitter.com/lYWipf63cp
— Bernhard Engelbrecht (@BernhardEngel_) May 29, 2025
Text:
😃 The Natasha neural network turned out to be 700 Indian programmers
The startup BuilderAI offered to write any application, like in a constructor, by selecting the necessary functions.
In reality, customer requests were sent to the Indian office, where 700 Indians wrote code instead of AI.
With the help of this scam, the startup attracted $445 million in investments from major IT giants, including Microsoft, over eight years.
At the same time, the applications “written by AI” constantly glitched, the code was unreadable, the functions did not work — in general, everything was like real artificial intelligence.
After the deception was exposed, the startup officially went bankrupt 🤷♂️
Builder.ai’s pitch on their website states that “AI assembles your app features like a LEGO set.”
More on how “Natasha” works here.
Now the relevant part. A couple days ago, Bloomberg published a piece with a pretty incendiary headline: Builder.ai Faked Business With Indian Firm VerSe to Inflate Sales, Sources Say
Builder.ai, the artificial intelligence startup that recently announced plans to declare bankruptcy, faked business with the Indian social-media startup VerSe Innovation for years to falsely inflate its sales, according to documents reviewed by Bloomberg and people with direct knowledge of the practice.
The two companies routinely billed one another for roughly the same amounts between 2021 and 2024, documents reviewed by Bloomberg show, as part of an alleged practice known as “round-tripping” that the people said Builder.ai used to inflate revenue figures it presented to investors. In many cases, products and services weren’t actually provided to either company for these payments, said the people, who asked not to be identified discussing confidential information.
VerSe Innovation co-founder Umang Bedi said the allegations of inflating revenues are “absolutely baseless and false.” Defamatory even. “We’re not the kind of company that is in the business of inflating revenues,” he said.
Amid accusations of financial statement malfeasance, VerSe brought Deloitte in for an audit in 2024. Deloitte flagged a lack of appropriate internal controls over the evaluation and selection of suppliers, approval of purchase orders and invoices, and payments. Despite the risk of material misstatement, Deloitte said the company’s consolidated financial statements presented as true and fair.
The US Attorney’s Office for the Southern District of New York had already been sniffing around before Builder.ai went bust, requesting financial statements and details on accounting policies according to earlier Bloomberg reporting.
Wall Street Journal wrote about the company way back in 2019, when it went by Engineer.ai. In “AI Startup Boom Raises Questions of Exaggerated Tech Savvy” WSJ wrote:
Startup Engineer.ai says it uses artificial-intelligence technology to largely automate the development of mobile apps, but several current and former employees say the company exaggerates its AI capabilities to attract customers and investors.
Documents reviewed by The Wall Street Journal and several people familiar with the company’s operations, including current and former staff, suggest Engineer.ai doesn’t use AI to assemble code for apps as it claims. They indicated that the company relies on human engineers in India and elsewhere to do most of that work, and that its AI claims are inflated even in light of the fake-it-’til-you-make-it mentality common among tech startups.
Those rumors didn’t deter Microsoft from investing in the company in 2023. Microsoft Corporate Vice President, Business Development Jon Tinter said at the time their collaboration with Builder.ai “is an extension of our mission to empower every person and every organization on the planet to achieve more.”
“We see Builder.ai creating an entirely new category that empowers everyone to be a developer and our new, deeper collaboration fuelled by Azure AI will bring the combined power of both companies to businesses around the world,” he was quoted as saying in a press release.
Something else to note: A design studio in Poland pointed out on LinkedIn that Builder.ai’s logo looks awfully familiar.
The lesson here? Public Enemy said it best. Those of us who were alive for the dot-com boom remember the overhyped internet darlings being showered in buckets of cash. We also remember only a handful lived up to the hype when all was said and done.
