Builder.ai and Indian startup VerSe Innovation are under fire for allegedly inflating revenues through mutual billing tactics, leading to insolvency and investor deception. Read the full story.

Introduction

In a shocking revelation shaking the global tech scene, once-promising AI startup Builder.ai and India’s social media heavyweight VerSe Innovation are facing serious allegations of orchestrating fake transactions to artificially inflate their revenues. The scandal, first exposed by Bloomberg, has sent ripples through investor communities and cast a shadow over the credibility of AI startups.

The Rise and Fall of Builder.ai

Once a Promising Star in AI

London-based Builder.ai once stood at the forefront of AI innovation, hailed as a startup to watch. Backed by influential investors including Microsoft and Qatar’s sovereign wealth fund, it secured over $500 million in funding.

Sudden Collapse and Insolvency

Things took a dramatic turn in early 2025 when Builder.ai filed for insolvency, just weeks after its flamboyant founder Sachin Dev Duggal resigned. Duggal, who dubbed himself the company’s “chief wizard,” stepped down amid growing scrutiny over financial irregularities.

Alleged Round-Tripping with VerSe Innovation

Understanding the Round-Tripping Scheme

According to Bloomberg’s investigation, Builder.ai and VerSe Innovation allegedly engaged in “round-tripping”—an accounting trick where two entities invoice each other for similar amounts without actual exchanges of services or products.

No Real Business Activity?

Internal documents suggest that between 2021 and 2024, both companies issued invoices to one another for matching sums, often without delivering any tangible services. This strategy allegedly aimed to mislead investors by creating a facade of growth and market demand.

The VerSe Innovation Connection

A Rising Star in Indian Social Media

VerSe Innovation is best known for DailyHunt, a multilingual news aggregator, and Josh, a short-video platform created after India banned TikTok. With backing from Google and Goldman Sachs, VerSe commands a massive user base in India.

Denials and Rebuttals

In response to the allegations, VerSe co-founder Umang Bedi strongly denied any wrongdoing, calling the accusations “baseless and false.” He maintained that VerSe has always upheld ethical business practices.

Impact on the Startup Ecosystem

Investor Confidence Takes a Hit

The revelations have rattled investor trust not only in Builder.ai and VerSe but also across the broader tech startup ecosystem. Major lenders allegedly slashed Builder.ai’s revenue projections from $220 million to $55 million, leading creditors to withdraw support.

A Blow to AI Sector Credibility

As AI startups increasingly seek venture funding, this scandal raises concerns about transparency and accountability. Experts warn that inflated valuations based on dubious revenue streams could destabilize the market.

Leadership Changes and Blame Game

New CEO’s Response

Builder’s new CEO, Manpreet Ratia, who took over after Duggal’s departure, acknowledged the company had suffered from prior leadership failures. However, he blamed creditors’ “unexpected and irreversible actions” for the company’s demise.

Regulatory Oversight Demands

The case has intensified calls for stronger financial oversight and due diligence in evaluating tech ventures. Industry analysts argue for regulatory frameworks to detect and deter such schemes early on.

Conclusion

The unraveling of Builder.ai and its questionable financial ties with VerSe Innovation serve as a cautionary tale for the AI startup ecosystem. It underscores the urgent need for greater transparency, ethical leadership, and investor diligence. As regulators and investors reassess their strategies, this scandal might very well reshape how we define success in the age of artificial intelligence.

FAQs

1. What is round-tripping in financial fraud?
Round-tripping involves two companies invoicing each other without real exchanges of services, creating the illusion of legitimate business to boost financial metrics.

2. Who is Sachin Dev Duggal?
He is the founder and former CEO of Builder.ai, a British AI startup that recently filed for insolvency following financial misconduct allegations.

3. What is VerSe Innovation?
VerSe is an Indian tech company behind popular apps like DailyHunt and Josh, and is backed by major investors like Google and Goldman Sachs.

4. How much funding did Builder.ai raise before collapsing?
Builder.ai raised over $500 million from high-profile investors including Microsoft and the Qatari Investment Authority.

5. What does this mean for AI startups?
The scandal underscores the need for better oversight and transparency to protect investors and maintain public trust in emerging technologies.