With 700 engineers in India faking AI functions, the hype machine had also engaged in round-tripping to augment a mirage.

A London-based tech startup, once celebrated for its AI-driven innovations, has last month been on the verge of crumbling, amid investigations that have exposed a massive operational deceit: its much-touted AI has never been powered by algorithms, but by hundreds of engineers in India.

The firm, Builder.ai, had attracted US$450 from tech giants by marketing its platform as a no-code revolution capable of building apps “as easily as ordering pizza”. Instead, it has been discovered that its  flagship AI assistant functioned as little more than a chatbot that routed client requests to a 700-person engineering team in India that manually wrote code while leadership falsely claimed it was AI-generated.

The unraveling of the deception began in 2024 when former executives sued the firm for US$5m, alleging misleading claims about the supposed capabilities of the firm’s AI assistant. Legal filings have revealed that the firm’s AI tools were actually non-functional. Instead, human engineers had been handling nearly all development. One former employee was quoted as saying: “There was no real AI —(the AI assistant) was just a front-end chatbot.”

Early this year, financial misconduct accelerated the downfall. An independent audit had found that the firm had inflated its 2024 revenue from US$50m to US$220m. The firm was allegedly engaged in “round-tripping” with Indian social media firm VerSe Innovation, billing each other for fictitious services to artificially boost sales figures. Subsequently, lender Viola Credit had seized US$37m from company accounts, leaving just US$5m in restricted funds, and triggering global layoffs.

US prosecutors further intensified scrutiny, demanding internal records weeks before the bankruptcy filing. Regulatory probes now focus on whether the firm’s leadership had knowingly defrauded investors — a claim denied by the firm’s leader, Sachin Dev Duggal. In a defiant Instagram post, the latter had framed his ouster as a consequence of “daring greatly”.

The collapse underscores broader concerns about “AI washing” in tech: scaling hype over substance.