Builder.ai, which was once a highly praised AI startup, has gone bankrupt after it was discovered that its AI was actually operated by hundreds of human engineers in India.
The company based in London advertised its virtual assistant “Natasha” as capable of building apps using AI, claiming it would make software development much easier. However, the Times of India found that people were actually coding the customer requests instead of using AI.
In May, Viola Credit took $37 million from Builder.ai’s accounts, which revealed that the company’s revenue was overstated. The audit showed that the company earned only $50 million, which is much less than the $220 million it claimed to investors.
As early as 2019, people started questioning Builder.ai’s technology after a Wall Street Journal report and a lawsuit from a former executive raised concerns about its AI. Even so, the company managed to secure over $445 million from investors such as Microsoft and the Qatar Investment Authority.
The U.S. government has started a federal investigation and is looking for financial and customer records. Earlier this year, Sachin Dev Duggal resigned as founder, and new CEO Manpreet Ratia is said to have found out about the company’s internal misrepresentations.
The company has to pay millions in cloud fees to Microsoft and Amazon and has let go of about 1,000 employees. In a post on LinkedIn, the company mentioned “historic challenges and past decisions” as the reason for its downfall.
The scandal has come to represent the negative side of the AI bubble after ChatGPT, leading people to question the practice of “AI washing.”
