Microsoft-Backed Builder.ai Faces US Scrutiny Over Alleged Phantom Deals
Another ’AI revolution’ darling stumbles—Builder.ai, the no-code platform propped up by Microsoft’s cash, now has regulators digging into its sales books. Turns out ’disruptive innovation’ sometimes means creative accounting.
Sources say the SEC is probing whether the startup inflated revenue numbers to keep the hype train rolling. Nothing boosts valuation like imaginary customers—until the feds come knocking.
Remember kids: In tech, it’s not fraud—it’s ’growth hacking.’ Just ask WeWork. Or Theranos. Or... well, you get the pattern.
Internal investigation reveals inflated sales
An internal investigation uncovered that Builder.ai’s reported revenues were grossly inflated. In March 2024, whistleblowers alleged that the company regularly over-represented its income to appear more profitable and attract investors.
Builder.ai touts itself as a no-code/low-code platform that companies can use to create custom apps rapidly leveraging AI.
After the leadership shakeup, internal reviews revealed huge errors in the company’s revenue reporting. Company insiders revealed that Builder.ai had exaggerated its revenue projections by more than 300%.
In updated provisional accounts, the company saw its forecast 2024 revenues cut from $220 million to just $55 million. Its 2023 revenues were similarly lowered to $45 million from $180 million. These cuts suggested a pattern of too-aggressive or fraudulent revenue recognition.
The audit also cast doubt on the legitimacy of sales via resellers in the Middle East. Investigators said they could not confirm that these resellers were real or that the transactions occurred. Some of the reported sales have never been collected, and in some instances, it was impossible to determine the end customers, the filings show.
Builder.ai had been held up as a European tech success story, with a business model that combined AI with software development to make it easier for noncoders to create apps. However, the new findings indicate the company’s slick public image may have been built on shoddy foundations.
Builder.ai takes step toward insolvency
The financial scandal has pushed Builder.ai into a full-blown collapse. In mid-May 2025, just days after the subpoena was received, the company formally announced it WOULD begin insolvency proceedings.
Manpreet Ratia, the current CEO who took over from Duggal in February, informed staff members in an internal memo that Builder.ai could not afford to pay its staff. The company’s biggest lenders, including Israel’s Viola Credit, had already claimed most of its cash after declaring a default triggered by the revenue restatement.
In 2023, Builder.ai raised over $250 million in an investment led by the Qatar Investment Authority. Microsoft also invested in a signed strategic partnership with the company. Among other prominent backers of the company were the World Bank Group’s International Finance Corp., Hollywood free-radical Jeffrey Katzenberg’s WndrCo, Lakestar, and SoftBank’s Deepcore incubator.
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