AI Startup Backed by Microsoft Revealed to Be 700 Indian Employees Pretending to Be Chatbots

A once-hyped AI startup backed by Microsoft has filed for bankruptcy after it was revealed that its so-called artificial intelligence was actually hundreds of human workers in India pretending to be chatbots.

Builder.ai, a London-based company previously valued at $1.5 billion, marketed its platform as an AI-powered solution that made building apps as simple as ordering pizza. Its virtual assistant, "Natasha," was supposed to generate software using artificial intelligence.

In reality, nearly 700 engineers in India were manually coding customer requests behind the scenes, the Times of India reported.

The ruse began to collapse in May when lender Viola Credit seized $37 million from the company's accounts, uncovering that Builder.ai had inflated its 2024 revenue projections by 300%. An audit revealed the company generated just $50 million in revenue, far below the $220 million it claimed to investors.

A Wall Street Journal report from 2019 had already questioned Builder.ai's AI claims, and a former executive sued the company that same year for allegedly misleading investors and overstating its technical capabilities.

Despite that, the company raised over $445 million from big names including Microsoft and the Qatar Investment Authority. Builder.ai's collapse has triggered a federal investigation in the U.S., with prosecutors in New York requesting financial documents and customer records.

Founder Sachin Dev Duggal stepped down earlier this year and was replaced by Manpreet Ratia, who reportedly uncovered the company's internal misrepresentations.

The company now owes millions to Amazon and Microsoft in cloud computing costs and has laid off around 1,000 employees. On LinkedIn, the company announced its entry into insolvency proceedings, citing "historic challenges and past decisions" that strained its finances.

The fallout is seen as one of the biggest failures of the post-ChatGPT AI investment boom and has renewed scrutiny of "AI washing"—the trend of rebranding manual services as artificial intelligence to secure funding.

Originally published on Latin Times