In one of the most outrageous cases of artificial intelligence hype unraveling, Builder AI, a Microsoft backed startup now filing for bankruptcy, has been caught running a fully human powered operation while claiming to be powered by cutting edge AI.
The company’s entire pitch was that its chatbot Natasha could help customers build custom apps through AI. In truth, it hired 700 engineers in India who posed as Natasha in client chats and wrote all the code by hand. No generative model. No machine learning. No intelligence involved. Just a dressed up call center pretending to be a high tech platform.
It is the clearest example yet of what the industry is calling AI washing, where companies claim their products use AI to attract investment and attention even when the technology barely plays a role. And it is working. Millions of dollars are being funneled into startups that slap AI labels on manual work and call it innovation.
How Did This Happen?
Builder AI raised big money and big expectations. Backed by Microsoft and reportedly working with major clients, the startup claimed it could generate apps automatically with a few chats through Natasha. It boasted $220 million in revenue. In reality, it pulled in closer to $50 million.
The company even faked deals with Indian social media firm VerSe Innovation to inflate sales numbers, according to sources and documents reviewed by Bloomberg. Eventually a lender seized $37 million when they discovered the revenue had been grossly overstated. Amazon is owed $85 million. Microsoft is out $30 million for unpaid cloud services. A former employee has filed a lawsuit. Auditors stepped in. The whole thing collapsed.
But let’s zoom out. This is not just about one startup lying. This is about an investing environment where these lies can flourish unchecked.
No One is Doing Real Due Diligence Anymore
Investors today are throwing money at anything with artificial intelligence in the pitch. It is a gold rush. They are not reading financials or digging deep into the product. They are looking for the next OpenAI or Anthropic and hoping their gut instincts are enough to make the call.
Speed has replaced scrutiny. Many investors are racing to get in early, fearing they will miss out if they wait too long to ask questions. This is the result: massive checks for startups that are all hype and no real product.
And the public is not buying it. A recent Pew Research study found that only 24 percent of Americans believe AI will help them, while 43 percent believe it will harm them. Half of respondents said they prefer speaking with a real person over AI, while only 12 percent said they would choose the AI assistant.
The Fallout is Just Beginning
Builder AI is now entering insolvency proceedings in the United States, the United Kingdom, and India. In a statement posted on LinkedIn, the company said that despite the hard work of its remaining team, it could not recover from past decisions and historic financial pressures.
But this collapse should not surprise anyone. It was built on fake AI and fake numbers. What should raise concern is how easily it got this far. Investors celebrated the company. Big tech welcomed them as partners. Few people looked under the hood.
This is the investing culture now. Bet fast. Ask questions later. And sometimes, not at all.
“Thou beholdest him and art distracted.” - Gilgamesh