Builder.ai files for bankruptcy, sparks federal investigation
The tech world is reeling after a report found that a once-celebrated startup backed by Microsoft relied on nearly 700 human workers in India posing as chatbots, despite marketing its services as powered by artificial intelligence (AI).
Builder.ai, a London-based company once valued at $1.5 billion, marketed itself as an AI-driven platform that made app development as simple as ordering a pizza.
Its flagship product, a virtual assistant named Natasha, was promoted as an AI capable of autonomously building software.
However, according to a report by the Times of India on Tuesday, the work was largely carried out manually by Indian engineers.
The deception began to unravel in May when lender Viola Credit seized $37 million from Builder.ai's accounts. Bloomberg also reported that the company had exaggerated its 2024 revenue forecast by 300%.
Despite earlier concerns raised in a 2019 Wall Street Journal article and a lawsuit from a former executive accusing it of misleading investors, Builder.ai secured more than $445 million in funding from major backers, including Microsoft and Qatar's sovereign wealth fund.
Its collapse has now sparked a US federal investigation, with New York prosecutors seeking financial and customer records.
Earlier this year, founder Sachin Dev Duggal stepped down and was succeeded by Manpreet Ratia, who reportedly uncovered internal discrepancies within the company.
Builder.ai now reportedly faces millions in unpaid cloud computing bills to Amazon and Microsoft and has laid off roughly 1,000 employees.
In a LinkedIn post, the company confirmed that it has entered insolvency proceedings, citing "historic challenges and past decisions" that have had a significant impact on its financial health.
