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Microsoft-Backed Builder.ai Files for Bankruptcy After ‘AI’ Ruse Exposed

The insolvency proceedings span five jurisdictions as lenders alongside US prosecutors demand financial and customer records to probe inflated metrics.

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Overview

  • Builder.ai filed for bankruptcy in May after lender Viola Credit seized $37 million over inflated 2024 revenue projections.
  • Its “Natasha” AI assistant was actually powered by roughly 700 software engineers in India rather than automated algorithms.
  • A February audit led by new CEO Manpreet Ratia uncovered actual revenue of $50 million, far below the $220 million in sales founder Sachin Dev Duggal had promised.
  • The company now owes $85 million to Amazon and $30 million to Microsoft in unpaid cloud computing fees.
  • The scandal represents the largest AI startup failure since ChatGPT’s launch and underscores growing investor wariness of unverified AI claims.