Builder.ai - The Greatest AI Scam in History
In the summer of 2023, Builder.ai, a British tech startup, held a lavish corporate retreat in Vietnam, celebrating a $250 million funding round from major investors like Microsoft, SoftBank, and Qatar's Sovereign Wealth Fund. The company, led by charismatic founder Sachin Dev Duggal, claimed to use artificial intelligence to automate app development, achieving a $1.5 billion valuation amidst the AI hype. However, it was later exposed that Builder.ai's claims were largely fraudulent. The company's operations were not primarily driven by cutting-edge AI, but by outsourced human developers in countries like India, Vietnam, Romania, Ukraine, and Poland. This elaborate scheme involved questionable business tactics, alleged accounting fraud, deceptive marketing, and inflated revenue figures, ultimately leading to one of the most significant AI-related controversies in recent history. The deception managed to win the trust of major clients like the BBC, Microsoft, and Virgin Group, despite internal warnings and early journalistic investigations.
The Rise of Engineer.ai
Initially named Engineer.ai, the company was founded in 2016 by Sachin Dev Duggal, with the assistance of his friend Sourabh. The startup aimed to democratize software development by offering an easy-to-use platform for building custom applications, particularly for growth-oriented businesses. Duggal frequently used the analogy of ordering a pizza to explain the simplicity of their service, emphasizing that users didn't need technical expertise to develop and scale their apps.
When somebody doesn't know how to build software, they don't know how to deploy it. They don't know how it scales. They don't know them the service partners they need to go to. They don't know they need to go to Azure. Um they don't know who to use for payments. And our platform is designed around this vision of build, run, and scale. And our vision is really that you could be Joe's Pizzeria and become Domino's, and you didn't have to move off the platform.
The core pitch was compelling: customers would provide their ideas, and Engineer.ai's "revolutionary AI model" would handle the software development at an affordable price. Duggal allegedly claimed that 80% of all apps developed by Engineer.ai were built by artificial intelligence. This claim, especially before the widespread adoption of large language models (LLMs), was highly suspicious to industry experts, as AI technology at the time was not capable of such extensive automation in app development. However, Duggal's primary focus was on attracting non-technical customers and significant investors, for whom the appearance of innovative technology was more crucial than its actual technical capabilities.
The Deceptive Operations
Duggal meticulously crafted a five-step user process to make the service appear entirely AI-driven: 1) Chat with their AI, Natasha; 2) Get a fixed price and accurate timings; 3) Meet a dedicated expert; 4) AI assembles app features like a Lego set; and 5) Human specialists customize features, making the app ready for release. The centerpiece of their operations was "Builder Studio," which supposedly allowed users to specify features, automatically assemble the app using reusable code components, and required only a "small amount of human oversight." The studio also offered additional services like "Builder Cloud" for hosting and cost management, and "Studio 1" for post-launch maintenance, presenting an end-to-end solution.
Despite these claims, the reality was starkly different. Unbeknownst to investors and customers, Builder.ai relied heavily on a vast network of outsourced human developers. Internal sources later revealed that the "80% automated by AI" figure was a complete fabrication. Instead of sophisticated AI, hundreds of engineers in India, Vietnam, Romania, Ukraine, and Poland were manually building the apps. While some minimal AI components might have been used for customer requests, the scale of automation was nowhere near what Duggal advertised. This reliance on human labor directly contradicted their core promise of AI-driven development. The growth figures presented to investors were also allegedly inflated, with claims of revenue being overestimated by 300% through a "roundtrip billing scheme" that faked transactions to artificially boost earnings, creating the illusion of a legitimate and profitable business.
Investor Relations and Controversy
Dugal's strategy was to attract significant investment by presenting a narrative of rapid growth and cutting-edge innovation. His pivotal moment came with SoftBank, known for its founder Masayoshi Son's reputation for making investment decisions based on intuition rather than traditional due diligence. Son's interest in future-looking AI projects made him an ideal target for Duggal's pitch. After a meeting where Duggal presented his vision, Engineer.ai secured a $29.5 million Series A investment from SoftBank.
This initial funding fueled further claims of success. Engineer.ai's public statements boasted of $24 million in revenue and projected to cross the $100 million mark by the end of 2020, with customers including the BBC, Virgin Group, and the San Francisco Giants. However, this aggressive growth strategy, which prioritized inflated valuations over actual profitability, began to draw scrutiny. Venture-backed companies are often valued based on their growth rate, not just current earnings, a concept that Duggal leveraged to his advantage.
In 2019, The Wall Street Journal published an exposé titled "AI Startup Boom Raises Questions About Exaggerated Tech-Savvy," specifically targeting Engineer.ai. The report, based on accounts from current and former employees, accused the company of exaggerating its AI capabilities. Further accusations surfaced regarding the massive number of alleged engineers in their network—32,000 in late 2018, ballooning to 75,000 by May 2019—which seemed incongruous with a highly automated AI system. In response to the escalating controversy, Duggal rebranded Engineer.ai to Builder.ai within months, attempting to distance the company from the negative press. Despite the name change, the criticism was largely ignored, and the company continued its deceptive practices and aggressive marketing, even collecting client testimonials to rebuild its image.
The Downfall of Builder.ai
By 2023, Builder.ai reported $180 million in sales and secured over $400 million in total funding from investors including Microsoft, the Qatar Investment Authority, IFC, and SoftBank. Duggal, reportedly encouraging employees to call him "Chief Wizard," became more public, frequently using analogies to explain his vision to non-technical audiences, despite the growing internal issues. His charismatic persona and the company's $1.5 billion valuation made it appear as a promising startup.
However, the internal problems escalated. Robert Hudim, a former executive, filed a $5 million lawsuit against Duggal and Builder.ai after allegedly being dismissed for raising concerns about the automation promises. It was also discovered that the company had been operating without a CFO since July 2024, relying on an auditor with long-standing ties to Duggal, raising conflict of interest concerns. Builder.ai was failing to meet sales targets, covertly lowering them on its website. Dissatisfied clients also began to vocalize their complaints about the development services. The mounting pressure, combined with questionable financial practices, initiated a chain reaction leading to the company's eventual collapse.
By November 2024, despite Duggal receiving the EY Entrepreneur of the Year UK award, Builder.ai was in a state of panic internally. Secretly, Duggal and his team were under investigation by Indian authorities regarding a potential money laundering scheme and foreign exchange violations, linked to a company called Videocon, run by Duggal's friend and business partner, Sourabh. The investigation claimed Sourabh was involved in fraudulent bank loans. These allegations rapidly tarnished Builder.ai's reputation. The previously touted rapid increases in valuation were found to be allegedly overestimated by 300% through roundtrip billing, financially inflating their earnings without actual economic value. When one of Builder.ai's creditors, Voila, learned of the fraud allegations, they pulled out $37 million. The spreading information led to further losses and inquiries, forcing Duggal to step down as CEO in March 2025, replaced by Manited Ratia.
Upon taking control, Ratia launched an investigation into the company's accurate revenue over the past three years. He discovered that the claimed $220 million in 2024 revenue was closer to $50 million. With only $5 million in restricted funds remaining, the company halted operations and laid off nearly a thousand employees globally. Further investigations revealed Builder.ai's elaborate revenue inflation tactics, involving small upfront deposits, undisclosed discounts, and circular transactions through third-party intermediaries, with a former employee describing it as an "ocean of questionable practices." The core deception—the 80% AI automation claim—was definitively proven false, as 700+ Indian engineers and others worldwide were manually fulfilling customer requests. These outsourced engineers worked for a company called Versie, also connected to the roundtrip billing scam. Ultimately, Builder.ai became worthless and buried in debt, marking it as one of the largest cases of false advertising and alleged AI fraud in history.
Takeaways
- Deceptive AI Claims: Builder.ai, initially Engineer.ai, was founded on the false premise that it used advanced AI to automate 80% of app development, when in reality, the work was performed by hundreds of outsourced human developers.
- Inflated Valuations and Revenue: The company secured hundreds of millions of dollars from major investors like SoftBank and Microsoft by inflating its revenue figures by an alleged 300% through a roundtrip billing scheme, creating an illusion of rapid growth and profitability.
- Charismatic Founder's Role: Sachin Dev Duggal, the founder, used charismatic pitches and simple analogies (like ordering a pizza) to appeal to non-technical investors and customers, successfully obscuring the fraudulent nature of the business.
- Consequences and Downfall: Facing lawsuits, a lack of a CFO, internal dissent, and ultimately, investigations into money laundering and financial fraud, Duggal was forced to step down, and the company was revealed to be nearly bankrupt, leading to massive layoffs and a loss of its $1.5 billion valuation.
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