US prosecutors ordered embattled AI startup Builder.ai to hand over internal data weeks before the company collapsed into insolvency, according to reports.
Once one of the UK’s most hyped AI startups, Builder raised more than $500m from a host of big-name investors, including Microsoft and Qatar’s sovereign wealth fund, before collapsing into insolvency last week.
Last week, the Financial Times reported an internal investigation at Builder.ai had unearthed evidence of “potentially bogus” sales, leading the company to slash revenue forecasts. CEO Manpreet Ratia sent out an investor memo, seen by Sifted, blaming Builder’s creditors for pulling the plug.
In the weeks before Builder went bust, the US Attorney’s Office for the Southern District of New York demanded information including customer lists and accounting policies, Bloomberg reports, citing an email reviewed by the publication and people familiar with the matter.
Builder’s lawyer Adi Vinyarsh is said to have told employees to preserve documents following the request. Builder declined to comment.
Botched rescue
The probe marks the latest chapter in the collapse of a startup that drew major investors from around the world with its plan to make building customised apps as “easy as ordering a pizza”.
The unicorn last raised in a $250m round in May 2023 amid the AI boom following the release of ChatGPT.
In a leaked investor update note seen by Sifted, Manpreet Ratia — who took over as chief from founder Sachin Dev Duggal in March — hit out at a group of Builder’s most senior lenders after they “restricted all access to funds” provided under a $50m debt facility the startup drew down on late last year.
He told investors the company’s planned turnaround had been on track, claiming revenue for the quarter had already exceeded expectations.
Prior to Duggal’s exit, previously booked sales had been uncollected for long periods, raising concerns about revenue recognition and leading Builder’s new leadership to commission a law firm to carry out an internal investigation, the FT reported.
The publication added that the law firm reportedly indicated there may have been efforts to inflate revenues at the company.
Read the orginal article: https://sifted.eu/articles/builder-us-probe/
