Microsoft backed this $1.5 billion AI startup that was just discovered to be 700 engineers pretending to be AI

Now, here's a story you don't see every day. London-based AI startup Builder.ai has filed for bankruptcy after it was discovered that its "AI" services were secretly operated by a team of 700 human employees in India, masquerading as AI chatbots.

The tech firm previously marketed its services as an AI-powered tool designed to simplify app development, generating code based on queries supplied by the customer. It turns out that most of these queries were being handled by real human beings, and not artificial intelligence.

Builder.ai's services have been under scrutiny for some time. As far back as 2019, questions were asked about the legitimacy of its AI claims.

Last month, financial lender Viola Credit seized $37 million from Builder.ai, which led to a damning discovery that has only made things worse. Builder.ai had inflated its 2024 revenue projections by 300%, meaning its actual revenue was far below what it had previously told investors.

Builder.ai was backed by some big names in the tech space, including Microsoft. In 2023, Builder.ai and Microsoft announced a "strategic collaboration" that included integration in Teams and an equity investment from Microsoft.

When the partnership was first announced, Microsoft said "we see Builder.ai creating an entirely new category that empowers everyone to be a developer and our new, deeper collaboration fuelled by Azure AI will bring the combined power of both companies to businesses around the world."

Now, Microsoft is reportedly owed over $30 million in unpaid cloud computing fees, a sum that's unlikely to ever be settled now that the company has filed for bankruptcy.

Prosecutors in New York are now requesting customer and financial documents as a federal investigation in the United States gets underway.

The whole ordeal puts into question how a massive tech juggernaut like Microsoft missed the red flags. Unfortunately, with Builder.ai filing for bankruptcy, over 500 people have now lost their jobs.

What are your thoughts on Builder.ai and Microsoft's investment in the company? Let us know in the comments.

via Times of India & The Latin Times.