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Builder.ai, Dailyhunt Parent Accused of 'Inflating Sales' With 'No Real Services'| Read Here

Builder.ai and VerSe Innovation are under scrutiny for allegedly engaging in fake transactions to inflate revenues through round-tripping, a scheme involving invoice exchanges without actual services delivered

Builder.ai, Dailyhunt Parent Accused of 'Inflating Sales' With 'No Real Services'

An artificial intelligence start-up, Builder.ai, has allegedly did fake transactions with VerSe Innovation, the parent company of Dailyhunt. A Bloomberg report stated that the AI platform falsely boosted its sales for several years. The companies were allegedly engaged in a practice known as “round-tripping,” where they exchanged invoices for comparable amounts.

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This tactic involves cycling funds between companies without any genuine transaction, aiming solely to boost revenue appearances for investors. The report claimed that many of these transactions involved services that neither company actually delivered.

The Economic Times has earlier reported that Deloitte (VerSe’s auditor) raised concerns over significant internal control lapses in the company’s financial operations for FY24. It identified “material weaknesses” that could result in misreporting of expenses, trade payables, and other financial accounts.

It even flagged a ₹35 crore claim from a supplier that lacked proper justification and was not recorded as a payable by the company.

Builder.ai Goes Bankgrupt

The start-up, backed by tech giants like Microsoft, has collapsed after reality came into picture. Builder.ai, which claimed to use AI for its operations, allegedly defaulted on its core business functions. A social media user, Ebern Finance founder Bernhard Engelbrecht, revealed that the platform used “700 human engineers based in India” for coding.

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The new age business, which secured $445 million in funding, positioned itself as a no-code platform led by an AI assistant named ‘Natasha’. It even claimed that the platform could create software as easily as snapping together Lego pieces. However, Engelbrecht, in a viral post on X (formerly Twitter), stated that it was largely a manual backend operation masquerading as automation.

“Customer requests were sent to the Indian office, where 700 Indians wrote code instead of AI. The resulting apps were often buggy, dysfunctional, and riddled with unreadable code. Everything was like real artificial intelligence,” he wrote.

Inside The Fall

Builder.ai chief executive Manpreet Ratia told Bloomberg that Viola Credit had extended $50 million in debt to the company last year. However, the creditor withdrew $37 million from Builder.ai’s accounts and left $5 million in the company. The company will begin bankruptcy proceedings in each market (India, Singapore, UAE, US, and UK) on local legal frameworks.

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He did not disclose the reason behind the seizure. Amid a severe liquidity crunch, Builder.ai was forced to lay off the majority of its workforce. While $5 million remains in the company’s Indian bank accounts, Ratia explained that restrictions on outward remittances prevent the use of these funds to pay overseas employees.

Founded in 2012 by Sachin Dev Duggal, the start-up gained attention for its AI-driven platform designed to simplify the creation of websites and apps. At its peak, it was reportedly valued at around $1 billion and had secured more than $450 million in funding.

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