The AI company collapse happened in May 2025 when lender Viola Credit froze $37 million from its accounts. The move came after an audit exposed that the startup had overstated its 2024 revenue by 300%. Although founder Sachin Dev Duggal told creditors to expect $220 million in revenue, the actual number was closer to $50 million.
The deception behind the AI company's collapse came to light after Manpreet Ratia took over as CEO in February, stepping in for founder Sachin. While reviewing the business operations, Ratia discovered widespread financial irregularities.
In response, U.S. prosecutors in New York launched a federal investigation, requesting financial records and customer data.
For several years, Builder.ai allegedly engaged in fake business with the Indian social media platform VerSe Innovation to artificially boost its financial performance. Between 2021 and 2024, the two companies reportedly exchanged invoices for nearly identical amounts in a pattern known as “round-tipping”.
This tactic, often used to create the illusion of genuine business activity, allowed Builder.ai to present inflated revenue figures to investors, giving the impression of steady growth.
Signs of the deception showed up as early as 2019, when The Wall Street Journal exposed Builder.ai, revealing that the AI unicorn relied heavily on human force rather than artificial intelligence.
Even more so, in 2019, Robert Holdheim, a former executive at the company, filed a $5 million lawsuit claiming he was fired after raising concerns about the performance of Builder.ai, which “did not work as promoted and was essentially nothing more than ‘smoke and mirrors’.”
These revelations led to the resignation of founder Sachin Dev Douggal and the company’s bankruptcy filing.
The company is now in debt, including $85 million owed to Amazon and $30 million to Microsoft in cloud computing fees. Around 1,000 employees have lost their jobs.
The case has raised concerns about corporate governance and financial transparency in the startup ecosystem.
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