Builder AI Bankruptcy Files: $60 Million in Alleged Fake Transactions With Verse Innovation
India’s startup ecosystem has been shaken by one of the most startling controversies in recent years. Builder.ai, a software development startup once valued at over $1.5 billion, has reportedly filed for bankruptcy. What’s even more shocking is the claim that Builder.ai’s touted “AI-driven” app-building platform may have relied heavily on human labor — not real artificial intelligence.
The situation intensified with Verse Innovation — the parent company of popular platforms like Dailyhunt and Josh App — being named in the same financial irregularities.
According to a recent Bloomberg investigation, the two companies allegedly exchanged fake invoices worth $60 million between 2021 and 2024. Let’s break down what happened.
Alleged Fake Transactions: Builder.ai & Verse Innovation
According to Bloomberg:
- Builder.ai reportedly billed Verse Innovation for cloud and app development services.
- Verse, in turn, allegedly billed Builder.ai for advertising and marketing services.
- The invoices exchanged over four years reportedly lacked proper documentation and approvals.
This activity is being described as potential round-tripping — a method where companies simulate transactions to inflate revenue and appear financially healthier than they are.
Builder.ai: Allegations of Faked AI and Financial Misreporting
The Bloomberg report also highlighted:
- Builder.ai’s platform was marketed as AI-powered, but much of the development work may have been manual, involving hundreds of engineers.
- The company may have overstated its revenue, which misled both customers and investors.
- It reportedly received funding from notable firms like Microsoft, SoftBank, and Lakestar.
As of now, Builder.ai has filed for bankruptcy, and U.S. authorities are said to be investigating the matter.
Verse Innovation Denies Allegations
In response to the report:
- Verse Innovation stated that the transactions were legitimate.
- They claimed to have provided $80 million in cloud services to Builder.ai and received $50 million in ad services in return.
- The company labeled Bloomberg’s report inaccurate and misleading.
However, these claims are still under review, and no official judgment has been made.
Deloitte’s Internal Audit Raises Concerns
An independent audit conducted by Deloitte reportedly raised red flags:
- Invoices without proper vendor details or verification.
- Payments made without approval from relevant internal departments.
- Lack of clear audit trails for large financial transactions.
One example: An invoice worth ₹35 crore was reportedly issued by a vendor with no verified identity or business background.
As a result, Verse Innovation is believed to have laid off hundreds of employees in a cost-control effort.
Understanding Round-Tripping
Round-tripping is when companies exchange payments that create the illusion of revenue or business growth. It’s often used to:
- Inflate company valuations
- Attract investors
- Show artificial financial strength
Such activity, if proven, is considered fraudulent and is punishable under financial regulations.
India’s Frugal AI Innovation Stands Out
While the Builder.ai case raises concerns, it also highlights the contrast with genuine Indian AI innovation.
For example:
- A small Indian team reportedly trained an advanced reasoning model, Fathom R114B, on a budget of just $499 (₹43,000).
- The model performed well in benchmarks like IIT-JEE Advanced Math and Harvard-MIT Math Tournament, challenging much larger global models.
This shows how India can compete globally through cost-effective and honest AI innovation.
Zepto Delays IPO Plans
Meanwhile, another startup, Zepto, is delaying its IPO plans to 2026 due to:
- Profitability challenges
- Concerns raised by analysts about its cash burn
- Ongoing infrastructure and compliance issues, including food safety violations in warehouses
WazirX Faces Legal Challenges
India’s crypto exchange WazirX is also in the spotlight:
- The platform suffered a major cyberattack, with alleged losses exceeding $200 million.
- After its restructuring plan was rejected by a Singapore court due to jurisdiction issues, WazirX is reportedly considering moving its operations to Panama.
Weekly Startup Funding Update (India)
Despite scandals, startup funding in India remains strong:
- Total: $193 million raised
- Udaan: $114M in Series G
- Stable Money: $20M for fixed deposit platform
- Handpicked: ₹21.7 crore for curated produce delivery
- Spense: $1.85M for fintech integrations
- Gully Labs: ₹8.7 crore for streetwear sneakers
Final Thoughts: Time for Greater Transparency in Indian Startups
The Builder.ai and Verse Innovation controversy should serve as a wake-up call. Indian startups must prioritize:
- Authentic product development
- Financial transparency
- Independent audits and governance
- Long-term value over quick valuations
India has the innovation and talent to lead globally — but only if trust and ethics are at the center of its startup ecosystem.
READ MORE : Will Google Gemini AI Tool ruin the job of data scientist in 2025? Know the truth in HindI
FAQs
Q1. What is Builder.ai accused of?
Builder.ai allegedly faked its AI technology and engaged in improper financial transactions, leading to its bankruptcy filing.
Q2. What is the controversy with Verse Innovation?
Verse Innovation is alleged to have exchanged unverified financial transactions with Builder.ai, which are now under scrutiny.
Q3. What is round-tripping in business?
Round-tripping is a fraudulent practice where companies create fake transactions to inflate revenue and mislead stakeholders.
Q4. Are these companies being investigated?
Yes, Builder.ai is reportedly under investigation by U.S. authorities. Verse Innovation is also being audited internally.
Q5. Is the Indian startup ecosystem still strong?
Yes, despite this controversy, Indian startups continue to receive funding and innovate, especially in sectors like fintech, AI, and commerce.
