London-based Builder.ai allegedly “faked business” with social media company VerSe Innovation, falsely inflating sales at both companies for at least three years, according to reports.
Builder filed for insolvency two weeks ago, marking the collapse of what was once among Britain’s buzziest AI startups, having raised more than $500m from big-name investors like Microsoft and the Qatari Investment Authority.
But following the unexpected resignation of founder and self-proclaimed “chief wizard” Sachin Dev Duggal in March, the company has been dogged by claims it recorded “potentially bogus” sales, resulting in revenue forecasts being slashed and the company’s creditors alleging loan agreements had been breached.
Now Bloomberg reports Builder and VerSe, a social media startup based in India, “routinely billed one another for roughly the same amounts” from 2021 to 2024, a practice known as “round-tripping”, in which companies create the illusion of growth in order to mislead investors.
Citing internal documents and sources with direct knowledge of the matter, Bloomberg reports that, in many case, neither business provided products or services in exchange for the amounts billed.
Duggal, Builder and VerSe did not respond to requests for comment.
Problems
Bengaluru-based VerSe is a major player in India’s social media landscape, counting both Goldman Sachs and Google among its investors.
The company’s news aggregator app Dailyhunt boasts more than 350m users a month, while its video-sharing platform Josh — launched to coincide with the Indian government’s ban on TikTok — has accrued close to 200m monthly users since 2020.
In an interview with Bloomberg, VerSe cofounder Umang Bedi said the allegations were “absolutely baseless and false”, adding: “We’re not the kind of company that is in the business of inflating revenues.”
Builder CEO Manpreet Ratia, installed as chief after Duggan’s resignation, previously said there had been “problems” under the previous leadership, but maintained the company had since started moving in the right direction.
Despite Ratia’s assurances, Builder’s creditors would pull the plug after restated accounts marked expected revenues down from $220m to around $55m, the FT reported, citing people familiar with the matter.
In a memo to investors, leaked to Sifted, Ratia later blamed the company’s collapse on its lenders’ “unexpected and irreversible” actions.
Read the orginal article: https://sifted.eu/articles/builder-ai-verse-innovation-daily-hunt-faked-business-bloomberg/
