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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.