Artificial intelligence (AI) startup Builder. ai, which is filing for bankruptcy, has allegedly faked transactions with VerSe Innovation, the parent company of Dailyhunt, for several years to falsely boost its reported sales, according to a Bloomberg report.
What happened
Between 2021 and 2024, Builder. ai and VerSe Innovation reportedly exchanged invoices for similar amounts in a scheme known as “round-tripping”, according to sources familiar with the matter. This practice involves moving money between companies without any real exchange of goods or services — purely to inflate revenue figures for investors.
The Bloomberg report claims many of these transactions were for services that were never actually delivered by either company.
VerSe responds
Umang Bedi, cofounder of VerSe Innovation, dismissed the allegations, saying: “It was absolutely baseless and false” to suggest that VerSe recorded expenses or billed for services it didn’t receive or provide.
“We’re not the kind of company that is in the business of inflating revenues,” Bedi said in an interview.
The Deloitte audit
Last month, ET reported that Deloitte, the auditor for VerSe, flagged serious internal control issues in the company’s financial operations for the year ended March 31, 2024. The audit firm said these “material weaknesses” could lead to errors in reporting expenses, trade payables and other accounts.
Specifically, Deloitte pointed to gaps in how VerSe selects and evaluates suppliers, approves invoices and payments, and tracks its expenses. The firm also noted an “unsubstantiated claim” of Rs 35 crore from a supplier, which VerSe hasn’t recognised as a payable.
Despite these concerns, Deloitte clarified that its opinion on VerSe’s consolidated financials remained unchanged.
In response, VerSe said it was working to tighten its internal processes. The company said that it is conducting a detailed workshop on the “best practices and checklists” and aims to build a complete, well-documented system covering everything from supplier selection to payment approvals.
Builder. ai files for bankruptcy
Earlier this month, Builder. ai confirmed plans to file for bankruptcy after one of its key lenders, Viola Credit, seized $37 million from its accounts. This left the company with just $5 million in its reserves, according to CEO Manpreet Ratia.
Reports by Bloomberg revealed that Builder. ai had overstated its 2024 projected sales to creditors by 300%. This led to increased scrutiny and the freezing of its funds. As a result, US prosecutors have issued a subpoena demanding detailed financial records and customer information from the company.
Job cuts at both companies
On 17 May, VerSe Innovation announced it was laying off 350 employees as part of its push to focus more on AI and reduce costs. This follows a previous round of layoffs, when 150 employees were let go in 2021.
Meanwhile, as reported earlier, Builder. ai is also being forced to let go of most of its workforce due to a lack of available cash. According to Ratia, although the company still has $5 million in Indian bank accounts, restrictions on overseas remittances prevent it from paying its international employees.
Founded in 2016, Builder. ai offered a platform to help businesses quickly build custom apps with little or no coding, positioning itself as a faster and simpler alternative to traditional app development.
The startup attracted major investment, including $250 million in 2022 from QIA, a leading sovereign wealth fund. In 2023, Microsoft also became a strategic partner, investing in Builder. ai as part of a broader collaboration.
What happened
Between 2021 and 2024, Builder. ai and VerSe Innovation reportedly exchanged invoices for similar amounts in a scheme known as “round-tripping”, according to sources familiar with the matter. This practice involves moving money between companies without any real exchange of goods or services — purely to inflate revenue figures for investors.
The Bloomberg report claims many of these transactions were for services that were never actually delivered by either company.
VerSe responds
Umang Bedi, cofounder of VerSe Innovation, dismissed the allegations, saying: “It was absolutely baseless and false” to suggest that VerSe recorded expenses or billed for services it didn’t receive or provide.
“We’re not the kind of company that is in the business of inflating revenues,” Bedi said in an interview.
The Deloitte audit
Last month, ET reported that Deloitte, the auditor for VerSe, flagged serious internal control issues in the company’s financial operations for the year ended March 31, 2024. The audit firm said these “material weaknesses” could lead to errors in reporting expenses, trade payables and other accounts.
Specifically, Deloitte pointed to gaps in how VerSe selects and evaluates suppliers, approves invoices and payments, and tracks its expenses. The firm also noted an “unsubstantiated claim” of Rs 35 crore from a supplier, which VerSe hasn’t recognised as a payable.
Despite these concerns, Deloitte clarified that its opinion on VerSe’s consolidated financials remained unchanged.
In response, VerSe said it was working to tighten its internal processes. The company said that it is conducting a detailed workshop on the “best practices and checklists” and aims to build a complete, well-documented system covering everything from supplier selection to payment approvals.
Builder. ai files for bankruptcy
Earlier this month, Builder. ai confirmed plans to file for bankruptcy after one of its key lenders, Viola Credit, seized $37 million from its accounts. This left the company with just $5 million in its reserves, according to CEO Manpreet Ratia.
Reports by Bloomberg revealed that Builder. ai had overstated its 2024 projected sales to creditors by 300%. This led to increased scrutiny and the freezing of its funds. As a result, US prosecutors have issued a subpoena demanding detailed financial records and customer information from the company.
Job cuts at both companies
On 17 May, VerSe Innovation announced it was laying off 350 employees as part of its push to focus more on AI and reduce costs. This follows a previous round of layoffs, when 150 employees were let go in 2021.
Meanwhile, as reported earlier, Builder. ai is also being forced to let go of most of its workforce due to a lack of available cash. According to Ratia, although the company still has $5 million in Indian bank accounts, restrictions on overseas remittances prevent it from paying its international employees.
Founded in 2016, Builder. ai offered a platform to help businesses quickly build custom apps with little or no coding, positioning itself as a faster and simpler alternative to traditional app development.
The startup attracted major investment, including $250 million in 2022 from QIA, a leading sovereign wealth fund. In 2023, Microsoft also became a strategic partner, investing in Builder. ai as part of a broader collaboration.
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