How a London startup with 700 Indian programmers faked an AI revolution, cheated investors out of $450 million, and became the Theranos of the generative AI boom
The promise was irresistible: developing apps "as easy as ordering pizza" using revolutionary AI that could code faster than human developers. For nearly a decade, Builder.ai sold this dream to investors, customers, and the tech world, raising over $450 million and reaching a stunning $1.5 billion valuation—with backing from Microsoft and Qatar's sovereign wealth fund.
Behind the shiny demos and AI buzzwords, however, lay one of the most brazen tech scams of the generative AI era. The company's alleged AI assistant, "Natasha," wasn't powered by machine learning algorithms or neural networks. Instead, it was an elaborate setup orchestrated by over 700 human programmers in India who worked around the clock to manually fulfill customer requests, while executives maintained a years-long deception that would eventually collapse spectacularly.
The rise of a false prophet
Builder.ai began in 2016 as Engineer.ai, the brainchild of serial entrepreneur Sachin Dev Duggal and his co-founder Saurabh Dhoot. Duggal, who called himself the company's "Chief Wizard," had a vision that perfectly aligned with Silicon Valley's perpetual hunger for disruption: democratizing software development by eliminating technical expertise.
The concept seemed ingenious in its simplicity. Customers would describe their app requirements to Natasha, Builder.ai's AI assistant, who would then assemble prefabricated components like digital Lego bricks to create customized software. No programming required, no technical knowledge necessary—just a conversation with an intelligent machine that understood exactly what they wanted to build.
"We want to make building software as easy as ordering pizza," Duggal told investors—a slogan that became the company's unofficial motto. The timing couldn't have been better. In an era where every company needed a digital presence but struggled with the complexity and cost of custom development, Builder.ai seemed to offer a revolutionary solution.
Early investors enthusiastically embraced the vision. The company's Series A round in November 2018 raised $29.5 million, led by prominent European VC firm Lakestar. By 2019, Builder.ai claimed to have generated $24 million in revenue within its first six months of operation—figures that seemed to confirm the massive market opportunity.
But even as awards and funding poured in, cracks began to appear. A 2019 Wall Street Journal investigation raised uncomfortable questions about Builder.ai's technology claims, suggesting that the platform relied heavily on human programmers rather than artificial intelligence. Former employees described the operation as "all engineering, no AI," with most of the programming work performed manually by employees in India.
The great deception unfolds
The Journal investigation should have been the death knell for Builder.ai's AI claims. Instead, the company doubled down on its deception, using increasingly sophisticated methods to obscure the human work that powered its supposedly automated platform.
Internal documents and employee testimonies paint a picture of an elaborate performance designed to maintain the AI illusion. The 700-person team of Indian programmers worked in shifts to be available around the clock, manually programming applications while maintaining the fiction that Natasha was doing the work. Former employees described it as a "call center with better marketing," with developers joking about "Natasha" being their internal code for the night shift.
The deception wasn't limited to customer-facing interactions. Demos for investors and potential partners were carefully choreographed to showcase Natasha's alleged capabilities, while human operators worked behind the scenes to deliver results that appeared to be generated by AI. The company's promotional materials consistently emphasized speed and automation, claiming that its platform could deliver functional applications in "days or weeks" with minimal human intervention.
Security researcher Jeremiah Fowler later discovered evidence of the fraud in an unsecured AWS bucket, where a folder named "/Natasha_AI" contained Excel spreadsheets that meticulously tracked human programming hours—what he called "fraud in plain sight."
The human workforce wasn't just large; it was essential to every aspect of Builder.ai's operations. Customer requests were analyzed by the Indian team, who then adapted pre-built templates and wrote additional code as needed. While some basic functions could be automated with traditional software, anything requiring real problem-solving or creativity was handled entirely by human developers.
Financial manipulation and fake growth figures
| Year | Event | Valuation_Mio_USD | Financing_cumulative_million_USD |
|---|---|---|---|
| 2016 | Founded as Engineer.ai | 0 | 0.0 |
| 2018 | Platform launch, Series A ($29.5M) | 100 | 29.5 |
| 2019 | WSJ uncovers AI fraud | 150 | 29.5 |
| 2021 | Rebranding to Builder.ai, Series B ($65M) | 400 | 94.5 |
| 2022 | Series C ($100M) | 650 | 194.5 |
| 2023 | Series D ($250M), Microsoft partnership | 1500 | 444.5 |
| 2024 | Legal problems, founder resigns | 1500 | 444.5 |
| 2025 | Bankruptcy filed | 0 | 444.5 |
While Builder.ai worked to maintain its technological facade, the company also engaged in increasingly aggressive financial manipulation to support its growth story. Between 2021 and 2024, the startup orchestrated an elaborate "round-tripping" scheme with the Indian social media company VerSe Innovation, artificially inflating its revenues by as much as 300%.
The arrangement was deceptively simple, yet remarkably effective. Builder.ai would bill VerSe millions of dollars for services—typically described as "AI licensing" or "application development"—while VerSe simultaneously charged Builder.ai comparable amounts for services such as "market research" or "marketing support." In many cases, according to Bloomberg's investigation, these services were never actually provided.
The timing and amounts of these invoices were carefully orchestrated to avoid suspicion, with each company ultimately spending roughly the same amount on the other. Over the four-year period, Builder.ai collected nearly $60 million from VerSe while paying similar amounts for services that existed primarily on paper.
This financial manipulation allowed Builder.ai to present dramatically inflated revenue figures to investors. The company claimed $180 million in revenue for 2023, a figure that later had to be revised down to just $45 million. For 2024, Builder.ai projected $220 million in revenue, when the actual figure was closer to $55 million—a 30% discrepancy that would ultimately trigger the company's collapse.
The scheme was particularly insidious because it created the appearance of real business growth while providing the cash flow necessary for operations. Investors saw steadily increasing revenue figures and assumed Builder.ai was successfully scaling its AI platform, while in reality, the company was staying afloat primarily through financial manipulation and continuous capital raising.
The Unicorn Illusion
Despite growing evidence of technological and financial irregularities, Builder.ai's fundraising engine continued to run at full speed. The company underwent a strategic rebranding in 2021, dropping the controversial Engineer.ai name and launching new products such as Builder Cloud and Studio Store.
The rebranding coincided with a Series B round that raised $65 million, followed by a $100 million Series C in March 2022. But the real validation came in May 2023, when Builder.ai secured a massive $250 million Series D round led by the Qatar Investment Authority (QIA), one of the world's largest sovereign wealth funds.
The QIA investment was a coup for Builder.ai, providing not only capital but also the kind of credibility that opens doors to other institutional investors. Microsoft's simultaneous equity investment and strategic partnership announcement added another layer of legitimacy, indicating that one of the world's most successful technology companies had validated Builder.ai's AI capabilities.
The funding round boosted Builder.ai's valuation to between $1.3 billion and $1.5 billion, officially making it a "unicorn" startup. For Duggal and his team, it was the ultimate validation of their vision and seemingly proof that the market had embraced their AI revolution.
The collapse begins
But while Builder.ai celebrated its unicorn status, dangerous tensions were building in the background. The first major shock came in October 2024, when the company had to take out a $50 million credit line after actual revenue figures fell far short of the projected $220 million. Financial reserves dwindled to approximately $7 million by early 2025.
In February 2025, a dramatic leadership change occurred. Founder Sachin Dev Duggal stepped down as CEO and was replaced by Manpreet Singh Ratia, who previously worked at Jungle Ventures. Officially, this was presented as a strategic reorientation, but the change signaled deeper problems at Builder.ai.
Ratia's first task was to understand the company's true financial situation. What he discovered was shocking: The revenue figures had been massively inflated. An internal audit revealed that the $220 million in revenue reported for 2024 was actually only about $55 million—a discrepancy of 30%.
This discovery triggered a chain reaction. Viola Credit, the lender that had granted Builder.ai the $50 million credit line in 2024, promptly seized $37 million from the company's accounts, citing breaches of contract. Overnight, Builder.ai was virtually cashless.
The final crash
On May 20, 2025, Ratia was forced to inform Builder.ai's approximately 1,000 employees in a company-wide call that the company would file for bankruptcy. With only $5 million remaining in restricted Indian accounts, which could not be used for foreign transfers due to regulatory restrictions, Builder.ai was no longer able to pay salaries or meet basic operating obligations.
“Despite the tireless efforts of our current team and the exploration of all possible options, the company has not been able to recover from historical challenges and past decisions that have placed significant pressure on its financial position,” the company said in a LinkedIn statement.
The employees were shocked. "It's hard to believe how a company could go from over 1,000 employees to zero," wrote one software developer on LinkedIn. "Yesterday started as a normal day, and at the end we learned that Builder.ai had filed for bankruptcy. Everything changed in an instant."
Creditors faced significant losses. Amazon owed Builder.ai $85 million for cloud services, and Microsoft $30 million. The Qatar Investment Authority, which had invested $250 million just two years earlier, faced a near-total loss.
The legal review
| Area | status | Risk_Level | Affected |
|---|---|---|---|
| US criminal investigations | Active – Southern District NY | High | Company, Management |
| Founder's liability (India) | Arrest warrant against Duggal | High | Sachin Dev Duggal |
| Creditor lawsuits | Expected | Medium | All investors |
| Insolvency proceedings | Initiated (5 countries) | Active | All stakeholders |
| Managing director liability | Potential liability | Medium | CEO, CRO |
| Allegations of fraud | Round-tripping detected | High | Company, VerSe Innovation |
Even as Builder.ai fought for its survival, law enforcement authorities began investigating the company. The U.S. Attorney's Office for the Southern District of New York had already demanded the release of financial documents in the weeks before the collapse, focusing on allegedly inflated sales figures and questionable business practices.
The criminal investigation covers several potential criminal offenses: fraud against investors through deliberate deception about technological capabilities, falsification of financial statements through artificially inflating sales, and possibly money laundering through complex financial transactions between different companies.
These offenses could result in significant criminal consequences for the executives responsible. The international dimension of the case—Builder.ai operated in at least five countries—makes the legal investigation particularly complex, as parallel insolvency proceedings in different jurisdictions must be coordinated.
Lessons from the disaster
The Builder.ai case reveals serious gaps in due diligence practices for technology investments. Despite early warning signs—particularly the 2019 Wall Street Journal report—hundreds of millions of dollars continued to flow into the company. This raises critical questions: To what extent did investors verify the company's actual technological capabilities? Were the reported revenue figures sufficiently scrutinized?
The scandal joins a disturbing tradition of tech scams characterized by exaggerated promises and a lack of substance. The parallels to cases like Theranos in the biotech sector are unmistakable and could lead to a fundamental rethinking of the valuation of technology companies.
The Builder.ai scandal could have far-reaching consequences for the AI industry. Confidence in AI startups and their promises could be significantly shaken, leading to more critical evaluation and potentially stricter regulation. Paradoxically, this development could have positive effects: greater transparency, more realistic valuations, and better protection for investors.
The legacy of deception
The collapse of Builder.ai marks a turning point in the history of the AI industry. What began as a promising startup seeking to democratize software development ended up as a cautionary tale about the dangers of hype over substance.
The 700 Indian programmers who did the actual work now face an uncertain future. Their skills and dedication were real—it's just that the way their work was marketed was a lie. In a sense, they were the true victims of a system that sold human intelligence as artificial.
For the technology industry as a whole, Builder.ai should serve as a cautionary tale. At a time when AI technologies are increasingly becoming the focus of investment and public attention, the scandal underscores the need to distinguish between genuine innovations and mere promises—a lesson that has come at a high price for all involved.
The story of Builder.ai is ultimately not just the story of a spectacular fraud, but also a reflection of the times: an era in which belief in technological miracles was so strong that even experienced investors and tech giants like Microsoft were fooled. It's a story of how the dream of the AI revolution turned into a nightmare for everyone involved—except perhaps for those who recognized the truth in time and saved their investments.
Sources:
- Bloomberg: Builder.ai Faked Business With Indian Firm VerSe to Inflate Sales (May 31, 2025)
- TechCrunch: Once worth over $1B, Microsoft-backed Builder.ai is running out of money (May 20, 2025)
- Financial Times: Builder.ai staff 'still in shock' following collapse (May 21, 2025)
- Business Standard: Builder.ai faked AI with 700 engineers, now faces bankruptcy (June 4, 2025)