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 provides AI-powered business automation technology, has been indicted on charges that they defrauded investors and lenders by fabricating “substantially all” of the now-bankrupt company’s customer relationships and revenue.

Former CEO Puthugramam Chidambaran and former CFO Sayyed Farhan Ali Naqvi, who founded iLearningEngines in 2010, were charged in a 10-count indictment with directing an ongoing financial crime enterprise, securities fraud, wire fraud, and conspiracy to commit securities fraud and wire fraud.

The indictment was made public Friday in federal court in Brooklyn, New York. Chidambaran, 57, was arrested in Potomac, Maryland, where he lives, while Naqvi, 44, of Houston, was arrested in San Jose, California, prosecutors said. The attempted criminal charge carries a maximum sentence of life imprisonment.

Lawyers for the defendants did not immediately respond to requests for comment.

Prosecutors said iLearning marketed itself as an AI-focused digital education company with a “ready-to-use AI platform” and claimed it generated revenue primarily by selling licenses for its education and training platforms to customers, including healthcare companies and schools.

According to the indictment, the defendants used fraudulent contracts to make iLearning customers appear genuine and used “round trip” transfers of investor and lender funds to generate revenue; This meant that they were supposedly sending money to customers and then returning that money to iLearning.

The indictment stated that at least 90% of iLearning’s reported revenue of $421 million in 2023 was fabricated.

U.S. Attorney Joseph Nocella Jr. in Brooklyn. “While the defendants touted iLearning as a way to revolutionize education and training through artificial intelligence, the real artificial part of the defendants’ story was iLearning’s customers and revenues,” he said in a statement.

The company went public in April 2024, and its market cap on Nasdaq rose to $1.5 billion before a prominent short seller questioned its reported revenue.

The company filed for Chapter 11 protection from creditors in December 2024, converting that case into Chapter 7 liquidation in March 2025.

(Reporting by Jonathan Stempel in New York; Editing by Bill Berkrot) iLearningEngines Inc.