The $450 Million AI Deception: How Builder.ai Faked Its Way to Unicorn Status

Builder.ai's spectacular collapse in May 2025 stands as one of the most significant AI startup failures in history, representing not just a massive financial loss but a watershed moment that exposed systematic fraud in the AI industry.

This isn't your typical startup failure story. This is a $450 million autopsy that reveals how sophisticated deception, market hype, and due diligence failures created one of the most devastating AI washing scandals of the decade.

The company that promised to democratize app development through artificial intelligence was revealed to be an elaborate fraud, using approximately 700 human engineers in India to manually code applications while claiming AI automation. The deception involved prestigious investors including Microsoft, Qatar Investment Authority, and SoftBank, ultimately costing them nearly half a billion dollars when the house of cards collapsed.

The Mechanical Turk of the Modern Era

Builder.ai's story begins in 2016 when Sachin Dev Duggal, an Imperial College London graduate, founded the company (originally Engineer.ai) with a compelling vision: making app development "as easy as ordering pizza."