Builder.ai: The $1.5 Billion AI That Was Human

By Magnatefall Team · Published October 21, 2026 · Last updated October 21, 2026

The Builder.ai scandal is the story of a London startup that promised AI would build your app, reached a $1.5 billion valuation with Microsoft’s backing, and went bust in 2025. Reports say much of its “AI” work was done by human engineers, and its 2024 sales turned out to be about a quarter of what lenders were told.

The Builder.ai scandal is now one of the most cited examples of alleged AI washing. Here is how Builder.ai rose, why it fell, who lost money, and what AI washing actually means for investors and customers.

▶ Prefer to watch? See the full documentary on how Builder.ai lost $1.5 billion. Free on YouTube.

What Was Builder.ai Before the Scandal?

Builder.ai was a software company that said it could build custom apps and websites mostly with AI. Customers chatted with an assistant named Natasha, picked ready-made features like logins and payments, and the platform assembled the app. As an app builder, that pitch put Builder.ai up against no-code tools, with a promise of custom software at a fraction of the usual cost. Founder Sachin Dev Duggal said it would make building software as easy as ordering a pizza, Rest of World reported.

The company started in 2016 as Engineer.ai and later rebranded. It was based in London with offices in the US, the UAE, Singapore and France by 2023, plus large development teams in India. The Natasha bot was meant to handle the first 80% of a project before human engineers finished it, former staff told Rest of World.

Builder.ai Founder Sachin Dev Duggal

Sachin Dev Duggal is a British-Indian entrepreneur who founded Builder.ai and ran it as CEO from 2016 until February 2025. He gave himself the title “chief wizard.” On February 27, 2025, he stepped down as CEO but stayed on the board, and Manpreet Ratia took over, according to Tech.eu.

Duggal has publicly described the product as “human-assisted AI,” the Financial Times noted. That detail matters. Builder.ai never claimed humans did nothing. The dispute is over how much of the work the AI really did, and how the company’s sales were reported.

Builder.ai Valuation: How It Reached $1.5 Billion

Builder.ai raised a $29.5 million Series A in 2018. In May 2023 it announced a strategic partnership with Microsoft, with an undisclosed equity investment and plans to bring Natasha into Microsoft Teams and Azure, TechCrunch reported. Two weeks later it raised a $250 million Series D led by the Qatar Investment Authority, taking total funding past $450 million, per TechCrunch.

That round valued Builder.ai at about $1.5 billion, Bloomberg reported. Insight Partners, Iconiq Capital and Jungle Ventures also invested. Fast Company put it on its 2023 list of most innovative companies.

A note on the numbers: TechCrunch and the company said total funding topped $450 million, while Rest of World puts it at as much as $445 million. Both describe the same money, counted at different times.

Date	Event
2016	Founded in London as Engineer.ai
2018	Raises $29.5 million Series A
February 2019	Former executive Robert Holdheim sues, calling the company “smoke and mirrors”
August 2019	The Wall Street Journal reports human engineers do most of the coding
May 2023	Microsoft partnership and equity; $250 million Series D led by QIA; valued near $1.5 billion
Mid-2024	Cuts its revenue estimate for the second half of 2024 by 25%
February 27, 2025	Duggal steps down as CEO; Manpreet Ratia takes over
Spring 2025	Lenders led by Viola Credit seize about $37 million
May 20, 2025	Insolvency announced; staff told the money has run out
June 2, 2025	Engineer.ai Corp. files for Chapter 7 in Delaware

Natasha: Was Builder.ai’s AI Really Human?

Partly, according to reports, and this is the part of the Builder.ai scandal that went viral. The company did use some AI, but former employees told Rest of World that staff and outsourced developers in countries including India and Ukraine did the vast majority of the work. Back in 2019, the Wall Street Journal reported that the company relied on human engineers for most of its coding, TechCrunch noted.

Some details went viral that may not hold up. A widely shared claim that “700 engineers in India” were pretending to be the AI traced back to a social media post, not a news report, the Financial Times found. Engineer Gergely Orosz later quoted former staff who said Natasha’s code generator was a real tool built mostly by a UK team, CNBC-TV18 reported. Ratia also defended the tech, writing that “it wasn’t smoke and mirrors.”

So the fairest summary of natasha builder ai is this: the AI existed, but it did far less of the building than the marketing suggested.

Why Builder.ai Collapsed: The Revenue Side of the Builder.ai Scandal

The AI story made headlines, but at its core the Builder.ai scandal is about money. When Builder.ai borrowed from lenders led by Israeli firm Viola Credit in 2024, it projected $220 million in sales for 2024. The real figure was about $50 million, Bloomberg reported. Other outlets, including Moody’s, put it at about $55 million.

Bloomberg also reported that Builder.ai and Indian firm VerSe Innovation billed each other for similar amounts between 2021 and 2024, a practice called round-tripping that can inflate sales. VerSe called the claims “absolutely baseless,” according to TechSpot, and Builder.ai declined to comment, per Bloomberg.

Once the lenders saw the gap, they called a default. They swept about $37 million from the company’s accounts, leaving around $5 million in restricted funds, TechSpot reported. Builder.ai also owed about $85 million to Amazon Web Services, which the FT put at $88 million, and about $30 million to Microsoft for cloud services.

The Builder.ai Bankruptcy

On May 20, 2025, Builder.ai confirmed it was entering insolvency and appointing an administrator. “The business has been unable to recover from historic challenges and past decisions,” the company said, per TechCrunch. By June about 1,000 people, roughly 80% of staff, had lost their jobs.

In the US, Engineer.ai Corp. filed for Chapter 7 liquidation in Delaware on June 2, 2025, case 25-10984, court records show. Chapter 7 means the company is shut down and its assets sold, rather than restructured.

Microsoft-Backed Builder.ai: What Microsoft Lost

For Microsoft, the Builder.ai scandal was an embarrassment more than a big loss. It invested in Builder.ai in May 2023 and planned to plug its tools into Teams and Azure. The size of that stake was never disclosed. Some articles online say Microsoft put in $455 million, but that appears to confuse Microsoft’s stake with the company’s total funding. What is reported is that Builder.ai owed Microsoft about $30 million in unpaid cloud bills when it failed.

In a liquidation, lenders and other creditors are paid before shareholders. That leaves equity backers such as the Qatar Investment Authority, which led the biggest round, at the back of the line.

Builder.ai Scandal Investigations: Where the Case Stands

US prosecutors have been looking into the company. In October 2025, Bloomberg reported that federal investigators had subpoenaed Builder.ai’s former finance chief for communications with its auditors, per Bloomberg.

Separately, in April 2026, Sifted reported that Indian authorities had named Duggal a “key beneficiary” in a money-laundering case about funds allegedly siphoned from a defunct electronics company, per Sifted. That case concerns an earlier, unrelated business, not Builder.ai, and the allegations have not been proven in court.

As of publication, according to public reports, no individual has been criminally charged over the collapse of Builder.ai. Everyone involved should be treated as innocent unless a court finds otherwise.

What Is AI Washing?

AI washing, the label most often attached to the Builder.ai scandal, is when a company exaggerates or invents its use of artificial intelligence to look more advanced and win customers or funding. The name copies “greenwashing.” It ranges from calling simple software “AI” to claiming a product runs itself when people are doing the work, the BBC explains.

The problem has been around for years. A 2019 study by MMC Ventures found that 40% of new tech firms calling themselves AI startups used virtually no AI at all, the BBC reported. As AI became the easiest way to raise money, the temptation grew.

SEC AI washing cases

Regulators now treat AI washing as fraud when it misleads investors. On March 18, 2024, the SEC settled the first AI washing cases against two investment advisers, Delphia and Global Predictions. Delphia claimed to use AI and machine learning on client data when it did not. Global Predictions called itself the “first regulated AI financial advisor.” They paid $225,000 and $175,000 in penalties, the SEC said.

In April 2025, federal prosecutors in New York charged Albert Saniger, founder of the shopping app Nate, with fraud. They allege the app he pitched as AI-powered relied on hundreds of human workers in the Philippines, according to the Justice Department. He has not been convicted.

Fake AI companies: how to spot them

• Vague claims. “Powered by AI” with no detail on what the AI actually does.
• Slow delivery. If an “instant” AI product takes weeks, people are probably doing the work.
• Hidden labor. Large offshore teams that the marketing never mentions.
• Revenue that grows faster than customers. A warning sign of booked sales that may not be real.
• No outside testing. No independent audit, benchmark or technical paper behind the claims.

Case	Claim	What reports or regulators found
Builder.ai	AI assistant builds most of your app	Human developers did most of the work; 2024 sales overstated about four times (reported)
Delphia (SEC, 2024)	AI uses client data to pick investments	No such AI capability; $225,000 penalty
Global Predictions (SEC, 2024)	“First regulated AI financial advisor”	False and misleading; $175,000 penalty
Nate (DOJ, 2025)	AI completes online purchases	Alleged human workers in the Philippines; charges pending

Lessons From an AI Startup Collapse

The Builder.ai scandal fits a familiar unicorn collapse pattern. A founder tells a story investors want to hear, the valuation runs ahead of the business, and checks are skipped because everyone else is investing. Theranos sold a blood test that did not work as claimed, and the FTX collapse showed what happens when nobody checks where the money is.

For anyone using or investing in an AI product, the practical test is simple. Ask what the AI does, who does the rest, and whether anyone independent has checked the revenue.

Builder.ai Scandal: FAQ

The Verdict

The Builder.ai scandal is not proof that AI is a bad idea for building software. The company failed because it sold investors a more automated, faster-growing company than the one it had. The word “AI” opened doors worth $450 million. The numbers behind it could not keep them open.

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