Former Executives of Bankrupt AI Firm Face Fraud Charges

Former CEO and CFO Indicted for Defrauding Investors and Lenders at iLearningEngines

NEW YORK, April 17 (Reuters) - The former chief executive and chief financial officer of iLearningEngines, a company that provided AI-driven business automation technology, have been indicted on charges of defrauding investors and lenders by fabricating the company's customer relationships and revenue. Puthugramam Chidambaran, the 57-year-old founder of iLearningEngines, and Sayyed Farhan Ali Naqvi, the former CFO, 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 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.

According to the indictment, iLearningEngines marketed itself as an artificial intelligence-driven digital education company with an "out-of-the-box AI platform." The company claimed to earn revenue mainly by selling licenses for its educational and training platforms to customers, including healthcare companies and schools. However, prosecutors said that the defendants used forged sham contracts to make it seem that iLearningEngines' customers were real, and used "round trip" transfers of investor and lender funds to manufacture revenue.

The indictment stated that at least 90% of iLearningEngines' $421 million of reported revenue in 2023 was fabricated. 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.

| Year | Reported Revenue | % of Revenue Fabricated | | --- | --- | --- | | 2023 | $421 million | 90% | | 2024 | $1.5 billion (market value) | N/A | | 2025 | (Chapter 7 liquidation) | N/A |

Prosecutors said that while iLearningEngines pitched itself as a way to revolutionize training and education through AI, the truly artificial part of the defendants' story was iLearningEngines' customers and revenues. The case is being investigated by the U.S. Attorney's Office in Brooklyn.