Builder.ai, once a darling of the AI software development sector, faced legal scrutiny from US authorities just before its dramatic collapse this month, highlighting growing concerns about financial transparency in high-valuation AI startups.
According to documents reviewed by Bloomberg, the US Attorney's Office for the Southern District of New York issued a subpoena on May 8, 2025, demanding Builder.ai hand over financial statements, accounting policies, and customer lists. The company's General Counsel Adi Vinyarsh instructed employees to preserve all documents related to the request.
The investigation came after Builder.ai had already been grappling with serious financial irregularities. In March 2025, the company hired auditors to examine its books following allegations from former employees that it had inflated sales figures. Internal investigations later revealed that Builder.ai had overstated its 2023 revenue by approximately 300%, with actual figures closer to $45 million rather than the $180 million previously reported.
Founded in 2016 by Sachin Dev Duggal, the London-based company had positioned itself as an AI-powered platform that allowed businesses to build custom applications without coding expertise. This promise attracted over $450 million in funding from prominent investors including Microsoft, Qatar Investment Authority, and SoftBank, reaching a peak valuation of $1.5 billion in 2023.
The company's downfall accelerated in February 2025 when Duggal was ousted as CEO and replaced by Manpreet Ratia. Despite Ratia's efforts to restructure the business, including cutting 35% of the workforce and reducing quarterly operating expenses from $40 million to $21 million, the company's financial position became untenable when creditor Viola Credit seized approximately $37 million from its accounts in mid-May, leaving it with insufficient funds to meet payroll obligations.
On May 20, 2025, Ratia announced to the company's approximately 770 remaining employees that Builder.ai was entering insolvency proceedings. The company reportedly owed $85 million to Amazon Web Services and $30 million to Microsoft at the time of its collapse.