iLearningEngines executives charged with $420M AI company scam, defrauding investors

Ex-CEO, ex-CFO of bankrupt AI company charged with fraud

NEW YORK, April 17 (Reuters) - The former chief executive and chief financial officer of iLearningEngines, which provided AI-driven business automation technology, were indicted on charges they defrauded investors and lenders by fabricating "virtually all" of the now-bankrupt company's customer relationships and revenue. Former CEO Puthugramam Chidambaran, who founded iLearningEngines in 2010, and ex-CFO Sayyed Farhan Ali Naqvi were charged in a 10-count indictment with running a continuing financial crimes enterprise, securities fraud, wire fraud, and conspiracy to commit securities fraud and wire fraud. The indictment was made public on Friday in the Brooklyn, New York, ⁠federal court. Chidambaran, 57, was arrested in Potomac, Maryland, where he lives, while Naqvi, 44, of Houston, was arrested in San Jose, California, prosecutors said. The criminal enterprise charge carries a maximum sentence of life in prison. Lawyers for the defendants did not immediately respond to requests for comment. Prosecutors said iLearning marketed itself as an artificial intelligence-driven digital education company with an "out-of-the-box AI platform," and claimed to earn revenue mainly by selling licenses for its educational and training platforms to customers, including healthcare companies and schools. According to the indictment, ⁠the defendants used forged sham contracts to make it seem that iLearning's customers were real, and used "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -- to manufacture revenue. At least 90% of iLearning's $421 million of reported revenue ⁠in 2023 was fabricated, the indictment said. "While the defendants pitched iLearning as a way to revolutionize training and education through AI, the truly artificial part of the defendants' story was iLearning's customers and ⁠revenues," U.S. Attorney Joseph Nocella Jr. in Brooklyn said in a statement. The company went public in April 2024, and its market value on the Nasdaq peaked at $1.5 billion ⁠before a prominent short-seller questioned its reported revenue. The company filed for Chapter 11 protection from creditors in December 2024, and converted that case to a Chapter 7 liquidation in March 2025. Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot Our Standards: The Thomson Reuters Trust Principles., opens new tab

Tech CEO accused of running $420M AI business scam

(NewsNation) -- A tech CEO accused of running a company that claimed to provide AI-driven business solutions has been indicted on 10 counts for multiple financial crimes. Puthugramam "Harish" Chidambaran, the founder and former CEO of iLearning, and CFO Sayyed Farhan Ali "Farhan" Naqvi are accused of running a continuing financial crimes enterprise, conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud and wire fraud. According to the U.S. Justice Department, iLearning billed itself as a company that could "generate and infuse insights in the flow-of-work to drive mission critical business outcomes." The department alleges that iLearning claimed to earn revenue by selling licenses for its platforms, reporting more than $420 million in revenue in 2023. iLearning became a publicly traded company in 2024. iLearning, according to the Justice Department, "fabricated virtually all its customer relationships and revenues." "As alleged, the defendants exploited investor excitement over the AI boom and presented a rosy financial outlook to investors and lenders that was built on lies. While the two defendants pitched iLearning as a way to revolutionize training and education through AI, the truly artificial part of the defendants' story was iLearning's customers and revenues," U.S. Attorney Joseph Nocella Jr. said in a news release. "Our Office is committed to protecting investors and holding accountable corporate executives who undermine the integrity of our financial markets for personal gain." The FBI's recent Internet Crime Report detailed over 22,000 complaints about AI-related scams last year, with total losses exceeding $893 million.