Builder.ai, once celebrated as a revolutionary AI startup, is embroiled in a scandal involving alleged financial fraud through round-tripping invoices with Indian social media firm VerSe Innovation from 2021 to 2024.
Documents reviewed by Bloomberg reveal that the two companies routinely billed each other for roughly the same amounts, inflating Builder.ai's revenue figures to mislead investors. This practice, known as 'round-tripping,' has cast a shadow over the startup's credibility and financial ethics.
The London-based company, which secured $445 million in funding from investors including Microsoft, positioned itself as a no-code AI platform with its assistant "Natasha" marketed to build software with minimal input. However, it was later revealed that the AI platform was powered largely by hundreds of human engineers in India rather than true machine learning.
Builder.ai's financial troubles escalated after defaulting on a $50 million loan from Viola Credit, which led to the seizure of $37 million from its accounts, crippling its ability to pay payroll or continue operations.
Umang Bedi, VerSe co-founder, stated, "It was 'absolutely baseless and false' that his company would have recorded expenses or billed services that it didn’t receive or provide."VerSe maintains that the services exchanged with Builder.ai were verified by reputable external organizations, denying any wrongdoing.
The scandal raises serious questions about transparency, investor oversight, and the risks of accepting polished marketing claims without thorough verification in the startup ecosystem.
"Once seen as the future of AI-powered software development, Builder.ai’s downfall raises serious questions about transparency, investor oversight, and the risks of buying into polished marketing without verifying what lies beneath," industry analysts note.
This controversy highlights the need for stricter regulatory oversight and due diligence in the rapidly evolving AI startup space.
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Builder.ai, a London-based AI startup facing bankruptcy, allegedly inflated revenues through round-tripping invoices with Indian firm VerSe Innovation from 2021 to 2024. VerSe denies wrongdoing, calling claims 'absolutely baseless and false,' as the scandal raises concerns over financial ethics and investor oversight in the startup ecosystem.
