Behind bankruptcy plea of London start-up: It hired 700 Indian engineers to pose as AI tools

London-based Builder.ai, once valued at $1.5 billion and backed by Microsoft and Qatar’s sovereign wealth fund, has filed for bankruptcy after it was revealed that its so-called “AI-powered” app development was mostly done manually by engineers in India, According to a report from The Times of India.

According to the report, round 700 Indian engineers were posing as artificial intelligence while developing apps. The startup had raised over $445 million by promoting its AI-based app development platform.

The company marketed its platform as using AI to build apps quickly, powered by a digital assistant named “Natasha.”

Most of the coding was done manually

However, reports revealed that most of the coding was actually done manually by Indian tech workers, while the company falsely presented their work as AI-generated.

The collapse of Builder.ai

The collapse began in May 2025 when lender Viola Credit seized $37 million from Builder.ai’s accounts after discovering the company had inflated its 2024 revenue by 300 per cent. Founder Sachin Dev Duggal had claimed $220 million in sales, but an audit revealed the actual figure was just $50 million.

All engineer, no AI

Concerns about Builder.ai’s AI claims had surfaced as early as 2019, when The Wall Street Journal reported that the platform largely depended on human engineers rather than real AI. Former employees described it as “all engineer, no AI,”  according to the report.

The scheme fully unravelled when the new CEO, Manpreet Ratia, who replaced Duggal in February, discovered the extent of the financial misreporting. US prosecutors have since launched an investigation and requested access to the company’s records and customer data.

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Biggest AI startup collapse

Builder.ai’s downfall is considered the biggest AI startup collapse since the ChatGPT-driven investment boom began. The company now owes $85 million to Amazon and $30 million to Microsoft in cloud computing bills. About 1,000 employees have lost their jobs.

‘AI washing’ in the time of boom

The case has sparked renewed concerns over “AI washing”, a growing trend where companies rebrand traditional services as AI-powered to attract investment during the current tech boom.