In a shocking case that has caught the attention of the global tech world, Builder.ai, an AI startup based in London, and VerSe Innovation, the parent company of DailyHunt, have been accused of faking revenue through a dishonest financial method called round-tripping. According to media reports, both companies allegedly used sham deals to inflate their revenues by over $60 million between 2021 and 2024. These fake transactions were reportedly done without any actual exchange of services, raising serious questions about the trustworthiness of financial reports in startups.
What Is Round-Tripping?
Round-tripping is a fraudulent accounting practice where two companies exchange money or services, but without any real business purpose. The goal is to make it look like both companies are doing more business than they really are. This technique helps companies show fake growth and mislead investors. In the case of Builder.ai and VerSe Innovation, both companies allegedly raised invoices for services that were never delivered. These fake deals helped them inflate their financial statements and attract more funding.
How the Scam Worked
From 2021 to 2024, Builder.ai and VerSe Innovation reportedly engaged in mutual invoicing, which means they created fake bills for each other. These bills were supposedly for app development, tech support, or marketing services, but none of these services were actually provided. This type of fake accounting helped both companies show higher revenues, even though there was no real exchange of services or products. Reports say the total value of these fake deals was close to $60 million, allowing Builder.ai to impress investors and maintain a high valuation.
Builder.ai’s Rise and Fall
Builder.ai became one of the fastest-growing AI startups and was once valued at around $1.5 billion. The company had strong backers like Microsoft and the Qatar Investment Authority. However, after the fraud came to light, Builder.ai’s value dropped, and the company eventually filed for bankruptcy. Internal audits found that Builder.ai overstated its 2024 revenue by 300%, which shocked both the industry and its investors. The company is now under heavy regulatory scrutiny and could face serious legal consequences.
VerSe Innovation’s Denial
VerSe Innovation, the Indian company behind the popular platforms DailyHunt and Josh, has denied all allegations. The company says that its transactions with Builder.ai were completely legal and involved real services. However, a detailed audit by Deloitte found major issues in VerSe Innovation’s internal financial controls. The audit noted “material weaknesses”, meaning there were serious problems with how the company managed its accounts. This has raised doubts about the company’s transparency and honesty.
Investigations Underway
Regulatory bodies in India and the UK are now looking closely at these companies. Financial regulators are checking whether the companies broke any laws, and if so, who should be held responsible. Investigators are also looking at emails, contracts, and bank records to confirm the round-tripping claims. If the charges are proven, both companies could face heavy fines, legal actions, and even criminal investigations for misleading investors.
Investor Reactions and Market Impact
The news has sent shockwaves through the startup investment community. Investors are now questioning whether other startups might be using similar tricks to boost their numbers. Many have called for stronger financial audits, better due diligence, and more transparency from startups. This scandal has also made venture capitalists more cautious, especially when investing in startups that show sudden growth without solid business backing.
What This Means for the Startup World
This case is a wake-up call for the entire startup ecosystem. It shows that in the rush to become the next “unicorn” (a startup valued at over $1 billion), some companies may take unethical shortcuts. But these shortcuts can lead to serious legal trouble and loss of reputation. It also shows the need for better regulations and financial checks in the startup world. Companies must understand that long-term success can only be built on honesty and real value, not on fake numbers.
The Road Ahead
As investigations continue, both Builder.ai and VerSe Innovation face an uncertain future. Their ability to recover trust will depend on how transparent they are and whether they take real steps to fix their accounting systems. Industry experts say that corporate governance, financial discipline, and honest leadership will be key in rebuilding investor confidence.
The alleged $60 million round-tripping scandal involving Builder.ai and VerSe Innovation is one of the biggest tech fraud cases in recent times. It shows how fake accounting practices can damage even the most promising companies. As the tech world watches closely, this case could lead to stronger rules and better transparency standards for startups across the globe.
