The great AI scam: Builder.ai collapses under fake automation claims.

Billion-dollar AI lie: Builder.ai collapse exposes the greatest deception in tech since Theranos

In one of the most stunning downfalls of a tech unicorn in recent years, Builder.ai, a London-based startup once valued at US$1.5 billion, has filed for insolvency. Marketed as an artificial intelligence-driven platform for software development, Builder.ai claimed it could create apps “as easily as ordering pizza.” But behind the sleek branding and big promises, there was no autonomous AI. There were 700 data engineers in India manually coding everything.

The company, backed by major investors like Microsoft and the Qatar Investment Authority, raised over US$500 million since its launch in 2016. However, by mid-2025, revelations of financial manipulation, AI deception, and unpaid debts to major partners like Amazon and Microsoft triggered its downfall.

This scandal, often compared to Amazon’s own “fake AI” checkout technology, has not only embarrassed major players in tech but also highlighted the growing epidemic of “AI-washing”—when companies falsely market their human-run systems as AI-driven.

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What Builder.ai promised: AI that writes your code

Builder.ai pitched itself as the ultimate no-code/low-code solution for businesses looking to build apps. Its AI assistant, called Natasha, was marketed as a fully autonomous system capable of constructing full applications using modular code blocks.

Through the platform, clients could select features like chat, payment, location tracking, and more, and Natasha would allegedly assemble the software automatically. The interface was clean, simple, and designed to make the process feel magical, even intuitive.

Founder Sachin Dev Duggal, a charismatic entrepreneur who styled himself as “Chief Wizard”, claimed that Builder.ai used proprietary artificial intelligence to automate 80% of the app-building process. The company emphasised that only minimal human intervention was required.

This pitch proved highly effective. In 2023, Microsoft invested US$455 million, and Builder.ai’s valuation soared to US$1.5 billion. Major global brands and small businesses alike signed up, believing they were accessing cutting-edge AI-driven innovation.

What actually happened: Hundreds of engineers pretending to be AI

In April 2025, the truth unravelled.

Reports from Bloomberg and The Financial Times revealed that Builder.ai was never truly AI-powered. The apps were built by a large team of software engineers based in Noida and Bangalore, India, who worked long hours replicating the illusion of automation.

Former employees disclosed that they were instructed to avoid using Indian English phrases, respond only during UK business hours, and conceal their locations. All communication was routed through interfaces that made it appear as though Natasha, the AI assistant was doing the work.

One internal memo from 2022, leaked to reporters, read:

“Positioning must focus on our proprietary AI – human labour isn’t part of the story.”

This deliberate deception was part of a much larger strategy to present Builder.ai as a revolutionary AI company to investors, customers, and media outlets.

Financial fraud: The VerSe innovation round-tripping scheme

The AI hoax was just the beginning. Builder.ai also engaged in a fraudulent accounting practice known as round-tripping.

From 2021 to 2024, Builder.ai and Indian social media company VerSe Innovation (creator of DailyHunt and Josh) exchanged invoices for services that were never rendered. These identical invoices, totalling millions of dollars, were designed to inflate revenue figures and meet growth targets.

For example:

Reported 2024 revenue: US$220 million
Actual 2024 revenue (after audit): US$55 million

This artificial revenue spike was used to attract more investment and maintain its unicorn status. VerSe has denied any wrongdoing, but the scandal prompted both the SEC and the US Attorney’s Office for the Southern District of New York to begin investigations into securities fraud.

Builder.ai’s implosion: Debts, bankruptcy, and employee fallout

By March 2025, the financial pressure became too much. New CEO Manpreet Ratia, brought in to salvage the company, found that Builder.ai had only US$7 million left in reserves. Its total debts included:

US$85 million to Amazon
US$30 million to Microsoft
US$37 million seized by Viola Credit

Even a last-minute US$75 million bailout from existing shareholders wasn’t enough. Attempts to move cash from Singapore to pay employee wages failed when creditors seized those funds as well.

By May 2025, Builder.ai had no money left to make payroll in the US or UK. Ratia laid off over 80% of the company’s global workforce, about 1,000 people. On a company-wide call, he confirmed that Builder.ai was entering insolvency proceedings.

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Amazon’s “just walk out” tech: Another case of AI-washing

The Builder.ai scandal isn’t isolated. In 2024, Amazon was criticised after it was revealed that its “Just Walk Out” cashierless checkout system, promoted as using AI and computer vision was powered by 1,000 manual reviewers in India.

Customers were told that sensors and AI were monitoring their purchases. In reality, video footage was being sent to human workers who reviewed each shopping trip and confirmed what had been bought.

The key difference? Amazon never explicitly lied about the technology’s complete autonomy. Builder.ai, on the other hand, knowingly misled investors and clients about the role of AI versus human labour.

Why the deception worked: Investor hype and lack of oversight

Builder.ai’s deception worked for so long because it fed into two powerful forces:

Investor FOMO (Fear of Missing Out) in AI.
Limited understanding of what AI can and cannot do.

Terms like “low-code”, “automation”, and “machine learning” were used so frequently and so ambiguously that even experienced investors failed to spot red flags.

The company’s marketing strategy also contributed. Glossy presentations, media appearances, and a “Silicon Valley” style culture created an aura of innovation. Duggal’s title of “Chief Wizard” may have sounded tongue-in-cheek, but it masked a sophisticated operation of misdirection.

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The human cost: Layoffs, lawsuits, and broken trust

The fallout has been severe. Beyond the 1,000 layoffs and lost investments, Builder.ai faces multiple lawsuits from former partners and vendors. Employees, who were instructed to maintain the illusion, now face reputational damage in the industry.

Some engineers allege they were unaware of the scope of the deception. Others claim they were silenced or retaliated against for raising concerns. Several are reportedly cooperating with regulatory authorities in the US and UK.

Implications for the AI industry: Regulation and investor caution

The collapse of Builder.ai has sparked a broader conversation about transparency in AI. As governments consider how to regulate AI technologies, this case underscores the need for:

Clear definitions of what qualifies as AI in a commercial product.
Mandatory disclosure when manual labour is involved.
Third-party technical audits for investor protection.

Already, venture capital firms have begun revising their due diligence frameworks, requiring proof-of-concept demos and verifiable AI pipelines before funding.

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Can AI still be trusted?

The tech community now faces a challenge: how to maintain public trust in AI amid increasing “AI-washing”. When companies exploit the AI label for valuation hype without technological substance, they hurt the entire industry.

There are legitimate, powerful AI tools transforming healthcare, finance, logistics, and content creation. But scandals like Builder.ai risk derailing public perception and slowing adoption.

Startups need to be transparent about the real capabilities and limitations of their systems. Investors, meanwhile, must move beyond buzzwords and demand deeper technical literacy.

The end of AI illusions?

The collapse of Builder.ai marks a critical turning point. It’s the most high-profile failure of an “AI startup” since Theranos, and it reveals just how easy it is to misuse AI branding to secure millions in funding.

But it also offers a lesson. The future of AI doesn’t lie in fake interfaces or secret armies of engineers, but in transparent, responsible development. As more frauds are uncovered, those building real AI solutions with real results will finally get the trust and credit they deserve.

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