A $1.5B startup backed by Microsoft has collapsed after claims of AI deception. Hundreds of Indian developers posed as “Natasha,” a fake AI. Here’s the full story.
The $1.5 Billion Lie: Inside the Builder.ai Collapse
Builder.ai, once hailed as the future of AI-powered software development, has filed for bankruptcy. The London-based company, backed by Microsoft and SoftBank, promised to revolutionize app building through its virtual assistant “Natasha.” But there was no AI—just hundreds of human developers operating behind a digital mask.
Now, with the company insolvent, its founder wanted by Interpol, and lawsuits piling up, investors and users are left wondering how the world fell for a billion-dollar illusion.
“Natasha” Was Never AI
Founded in 2016 by entrepreneur Sachin Dev Duggal, Builder.ai raised over $445 million and claimed its proprietary AI assistant, Natasha, could autonomously create apps. The company pitched a bold future: drag-and-drop simplicity with zero coding.
But internal investigations and whistleblowers revealed the truth. Natasha didn’t exist. Instead, more than 700 developers—primarily based in India—handled each task manually, while clients believed they were interacting with AI systems.
The illusion worked, partly due to a slick UI and aggressive marketing. According to analysts, the deception might have lasted longer had it not been for a growing list of delayed projects, support inconsistencies, and mounting customer complaints.
Fabricated Financials and a Sudden Collapse
By early 2025, Builder.ai reported projected revenues of $220 million for fiscal year 2024. However, an audit by senior creditor Viola Credit uncovered a different story: actual revenue was just $55 million. The discrepancy triggered an immediate liquidity crisis.
Viola froze and seized $37 million in company assets. Left with only $5 million in operating capital, Builder.ai could no longer pay salaries or maintain infrastructure. Its website went offline in mid-May, and customer support vanished overnight.
On May 24, 2025, newly appointed CEO Manpreet Ratia filed for bankruptcy protection in the UK. Over 1,200 small businesses, many in North America and Europe, were left with half-built apps and no clear path forward.
Legal Fallout: Arrest Warrant for Founder, Microsoft Sues
The backlash was immediate and global. Interpol issued a Red Notice for Builder.ai founder Sachin Dev Duggal. As of May 31, his location remains unknown.
Microsoft filed a $75 million fraud suit, seeking to recover investments and damages tied to misrepresented AI capabilities.
The Indian Enforcement Directorate has launched a money laundering investigation focused on the offshore movement of investor funds.
Several employees are reportedly cooperating with authorities, revealing how clients were intentionally misled about Natasha’s abilities.
What This Means for the AI Industry
Builder.ai’s spectacular collapse has sparked intense debate in Silicon Valley. Critics say the case exposes the unchecked hype surrounding artificial intelligence and the willingness of VCs to fund buzzwords over substance.
“This is a Theranos moment for AI,” said one investor, comparing it to the infamous biotech fraud. “We need real validation, not just fancy demos and slide decks.”
Industry experts are calling for:
- Transparent AI benchmarks;
- Independent audits of startups claiming AI functionality;
- Investor education on technical due diligence.
While genuine AI tools like OpenAI’s ChatGPT and Google’s Gemini are advancing rapidly, Builder.ai’s fraud underscores the darker side of the gold rush.
Builder.ai promised a future where anyone could build software using AI. Instead, it delivered smoke and mirrors at massive scale, leaving clients stranded and investors burned.
The company’s implosion is now a case study in how not to build—or fake—AI. And as the dust settles, it’s clear that the tech world must reckon with the consequences of believing in fiction over functionality.
