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First Post
2 days ago
- Business
- First Post
Behind bankruptcy plea of London start-up: It hired 700 Indian engineers to pose as AI tools
A major AI scandal has shaken the tech world as once valued at $1.5 billion, has filed for bankruptcy. The company, backed by Microsoft and a Qatari sovereign fund, falsely claimed to build apps in minutes using AI, while actually relying on hundreds of human engineers in India. read more Behind bankruptcy plea of London start-up: It hired 700 Indian engineers to pose as AI tools London-based once valued at $1.5 billion and backed by Microsoft and Qatar's sovereign wealth fund, has filed for bankruptcy after it was revealed that its so-called was mostly done manually by engineers in India, According to a report from The Times of India. According to the report, round 700 Indian engineers were while developing apps. The startup had raised over $445 million by promoting its AI-based app development platform. STORY CONTINUES BELOW THIS AD The company marketed its platform as using AI to build apps quickly, powered by a digital assistant named 'Natasha.' Most of the coding was done manually However, reports revealed that most of the coding was actually done manually by Indian tech workers, while the company falsely presented their work as AI-generated. The collapse of The collapse began in May 2025 when lender Viola Credit seized $37 million from accounts after discovering the company had inflated its 2024 revenue by 300 per cent. Founder Sachin Dev Duggal had claimed $220 million in sales, but an audit revealed the actual figure was just $50 million. All engineer, no AI Concerns about AI claims had surfaced as early as 2019, when The Wall Street Journal reported that the platform largely depended on human engineers rather than real AI. Former employees described it as 'all engineer, no AI,' according to the report. The scheme fully unravelled when the new CEO, Manpreet Ratia, who replaced Duggal in February, discovered the extent of the financial misreporting. US prosecutors have since launched an investigation and requested access to the company's records and customer data. Biggest AI startup collapse downfall is considered the biggest AI startup collapse since the ChatGPT-driven investment boom began. The company now owes $85 million to Amazon and $30 million to Microsoft in cloud computing bills. About 1,000 employees have lost their jobs. 'AI washing' in the time of boom The case has sparked renewed concerns over 'AI washing', a growing trend where companies rebrand traditional services as AI-powered to attract investment during the current tech boom.
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Business Standard
2 days ago
- Business
- Business Standard
Builder.ai faked AI with 700 engineers, now faces bankruptcy and probe
Once valued at $1.5 billion, collapsed after it was exposed for passing off human-written code as AI-generated, triggering global layoffs, audits, and regulatory scrutiny Founded in 2016 by Sachin Dev Duggal, — previously known as — positioned itself as an artificial intelligence (AI)-powered no-code platform designed to simplify app development. Headquartered in London and backed by major investors including Microsoft, the Qatar Investment Authority, SoftBank's DeepCore, and IFC, the startup promised to make software creation "as easy as ordering pizza". Its much-touted AI assistant, Natasha, was marketed as a breakthrough that could build software with minimal human input. At its peak, raised over $450 million and achieved a valuation of $1.5 billion. But the company's glittering image masked a starkly different reality. Behind the curtain: 700 engineers, not AI Contrary to its claims, development process relied on around 700 human engineers in India. These engineers manually wrote code for client projects while the company portrayed the work as AI-generated. The façade began to crack after industry observers and insiders, including Linas Beliūnas of Zero Hash, publicly accused of fraud. In a LinkedIn post, Beliūnas wrote: 'It turns out the company had no AI and instead was just a group of Indian developers pretending to write code as AI.' Red flags as early as 2019 AI narrative had long drawn scepticism. A 2019 investigation by the Wall Street Journal found that most of the coding was done manually, with the AI capabilities largely exaggerated. Former employee Robert Holdheim sued the company for $5 million, claiming he was fired after flagging concerns over deceptive practices. Legal filings revealed had misled investors by claiming apps were '80% built' by AI, though the supporting tech was barely functional. Other ex-employees later confirmed the company was 'all engineer, no AI'. Financial irregularities and collapse In early 2025, a leadership shake-up saw Manpreet Ratia replace Duggal as CEO in a bid to restore investor confidence. But Ratia discovered the company had massively inflated its 2024 revenue — claiming $220 million when actual income was closer to $50 million. An independent audit exposed the discrepancy, prompting lender Viola Credit to seize $37 million from accounts. Left with only $5 million in restricted funds, the company's operations across five countries — including India, the UK, and the US — came to a standstill. With regulatory issues freezing fresh capital, failed to pay staff, leading to nearly 1,000 layoffs. Allegations of financial misconduct Further inquiries suggested may have engaged in 'round-tripping' with Indian social media firm VerSe to inflate sales numbers — a tactic that helped attract investment. The company reportedly owes $85 million to Amazon and $30 million to Microsoft in unpaid cloud services. A US federal probe is underway, with investigators seeking access to its financial and client data. Public admission and bankruptcy filing In a statement on LinkedIn, admitted defeat: 'Despite the tireless efforts of our current team and exploring every possible option, the business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position.' The company has begun formal bankruptcy proceedings in jurisdictions where it operated, including India, the UK, and the US. AI hype vs. startup reality downfall has reignited concerns around 'AI washing' — branding basic tech services as AI to capitalise on investor excitement. Phil Brunkard of Info-Tech Research Group noted that many startups 'scaled fast without robust technology or governance', riding a wave of unchecked hype. With regulators now probing how AI firms market their products, the episode has become a cautionary tale. What was sold as an AI revolution turned out to be a conventional outsourcing firm cloaked in buzzwords. The result: employees out of work, millions in investor losses, and renewed demands for transparency and accountability in the AI startup ecosystem.
Int'l Business Times
3 days ago
- Business
- Int'l Business Times
AI Startup Backed by Microsoft Revealed to Be 700 Indian Employees Pretending to Be Chatbots
A once-hyped AI startup backed by Microsoft has filed for bankruptcy after it was revealed that its so-called artificial intelligence was actually hundreds of human workers in India pretending to be chatbots. a London-based company previously valued at $1.5 billion, marketed its platform as an AI-powered solution that made building apps as simple as ordering pizza. Its virtual assistant, "Natasha," was supposed to generate software using artificial intelligence. In reality, nearly 700 engineers in India were manually coding customer requests behind the scenes, the Times of India reported. The ruse began to collapse in May when lender Viola Credit seized $37 million from the company's accounts, uncovering that had inflated its 2024 revenue projections by 300%. An audit revealed the company generated just $50 million in revenue, far below the $220 million it claimed to investors. A Wall Street Journal report from 2019 had already questioned AI claims, and a former executive sued the company that same year for allegedly misleading investors and overstating its technical capabilities. Despite that, the company raised over $445 million from big names including Microsoft and the Qatar Investment Authority. collapse has triggered a federal investigation in the U.S., with prosecutors in New York requesting financial documents and customer records. Founder Sachin Dev Duggal stepped down earlier this year and was replaced by Manpreet Ratia, who reportedly uncovered the company's internal misrepresentations. The company now owes millions to Amazon and Microsoft in cloud computing costs and has laid off around 1,000 employees. On LinkedIn , the company announced its entry into insolvency proceedings, citing "historic challenges and past decisions" that strained its finances. The fallout is seen as one of the biggest failures of the post-ChatGPT AI investment boom and has renewed scrutiny of "AI washing"—the trend of rebranding manual services as artificial intelligence to secure funding. Originally published on Latin Times
Time of India
4 days ago
- Business
- Time of India
How this billion-dollar London startup backed by Microsoft made 700 engineers sitting in India pose as AI
London-based , once valued at $1.5 billion and backed by Microsoft and Qatar's sovereign wealth fund, has filed for bankruptcy after reports that its "AI-powered" app development platform was actually operated by Indian engineers, said to be around 700 of them, pretending to be artificial intelligence. The startup, which raised over $445 million from investors including Microsoft and the Qatar Investment Authority, promised to make software development "as easy as ordering pizza" through its AI assistant "Natasha." However, as per the reports, the company's technology was largely smoke and mirrors, human developers in India manually wrote code based on customer requests while the company marketed their work as AI-generated output. dramatic collapse came in May 2025 when lender Viola Credit seized $37 million from the company's accounts after discovering the startup had inflated its 2024 revenue projections by 300%. Founder Sachin Dev Duggal had promised $220 million in sales to creditors, but an independent audit revealed actual revenue of just $50 million. Years of deception behind AI claims The deception wasn't new. As early as 2019, The Wall Street Journal exposed questionable AI claims, revealing that the platform relied heavily on human contractors rather than artificial intelligence. Multiple former employees described the company as "all engineer, no AI," with most development work performed manually by staff in India. Former employee Robert Holdheim sued the company for $5 million in 2019, alleging he was dismissed after complaining that technology "did not work as promoted and was essentially nothing more than 'smoke and mirrors'." Court filings claimed the company told investors apps were "80% built" by AI technology they had "barely even begun to develop." Regulatory scrutiny and bankruptcy filing The scheme unraveled when new CEO Manpreet Ratia , brought in to replace Duggal in February, discovered the extent of the financial misrepresentations. US prosecutors in New York have since demanded the company's financial statements and customer lists as part of a federal investigation. collapse represents the largest AI startup failure since ChatGPT's launch triggered a global investment frenzy. The company now owes $85 million to Amazon and $30 million to Microsoft in cloud computing fees, while approximately 1,000 employees have lost their jobs. The failure highlights growing concerns about "AI washing," companies rebranding conventional technology services as artificial intelligence to attract investment in the current AI boom.
Yahoo
29-05-2025
- Business
- Yahoo
A Billion Dollar AI Startup Just Collapsed Spectacularly
As the artificial intelligence industry struggles with ever-rising costs — not to mention a steady uptick in hallucinations — investors are getting impatient. One investment firm went as far as seizing $37 million from accounts owned by a UK-based AI startup meant to make developing apps "as easy as ordering a pizza." That left the company with just $5 million, according to Bloomberg, prompting its senior lenders to place it into default. With very little cash left to keep the ship afloat, CEO Manpreet Ratia closed the startup's doors and filed for bankruptcy. was previously one of the most well-funded tech startups in the game, with over $450 million in backing from sources as big as tech giant Microsoft, Japanese investment firm SoftBank, and the Qatari government's sovereign wealth fund. That gave it a valuation worth over $1 billion, drawing comparisons to Mark Zuckerberg's Meta. Ratia told the Financial Times the startup was "unable to recover from historic challenges and past decisions that placed significant strain on its financial position," adding that he had been running the business with "zero dollars" in its US and UK accounts. The CEO took over for founder and "chief wizard" Sachin Dev Duggal in March, after the latter saddled the business with hundreds of millions worth of debt while burning through its dwindling cash fund, according to FT. Duggal was likewise embattled in a high-stakes legal probe by authorities in India, who named him a suspect in an alleged money laundering case. For his part, Duggal denied the accusations, saying he was simply a witness, though FT has also reported Duggal heavily relied on the services of an auditor with whom he has close personal ties. It's not known what, exactly, pushed the first domino. Viola Credit, the company that seized coffers, has yet to give an explanation, though we can probably guess they saw the writing on the wall and simply hoped to pad their losses. It's a big moment for the AI industry, as the pressure grows for AI companies to actually come out with a usable — not to mention sustainable — product. Though AI companies accounted for 40 percent of the money raised by US startups last year, the vast majority of them have yet to turn a profit. Many AI startups struggle to find any consistent revenue stream at all beyond tech-crazed venture capitalists, and a not insignificant number have been caught misleading investors about their AI's capabilities to keep the cash flowing. Case in point, after Ratia took the helm back in March, lowered its revenue estimates for the last half of 2024 by 25 percent — a major blow for the much-hyped company. The startup was likewise caught trying to pass off human-built software as AI back in 2019. As auditors and journalists sift through the rubble to find out what went wrong, now makes as good a time as any to take a temperature check on unchecked AI hype. More on AI startups: Company Regrets Replacing All Those Pesky Human Workers With AI, Just Wants Its Humans Back
