By Jonathan Stempel
NEW YORK, April 17 (Reuters) – The previous chief government and chief monetary officer of iLearningEngines, which offered AI-driven enterprise automation expertise, had been indicted on prices they defrauded buyers and lenders by fabricating “just about all” of the now-bankrupt firm’s buyer relationships and income.
Former CEO Puthugramam Chidambaran, who based iLearningEngines in 2010, and ex-CFO Sayyed Farhan Ali Naqvi had been charged in a 10-count indictment with operating a unbroken monetary crimes enterprise, securities fraud, wire fraud, and conspiracy to commit securities fraud and wire fraud.
The indictment was made public on Friday within the Brooklyn, New York, federal court docket. Chidambaran, 57, was arrested in Potomac, Maryland, the place he lives, whereas Naqvi, 44, of Houston, was arrested in San Jose, California, prosecutors mentioned. The legal enterprise cost carries a most sentence of life in jail.
Attorneys for the defendants didn’t instantly reply to requests for remark.
Prosecutors mentioned iLearning marketed itself as a synthetic intelligence-driven digital schooling firm with an “out-of-the-box AI platform,” and claimed to earn income primarily by promoting licenses for its academic and coaching platforms to clients, together with healthcare corporations and colleges.
Based on the indictment, the defendants used solid sham contracts to make it appear that iLearning’s clients had been actual, and used “spherical journey” transfers of investor and lender funds — that means they despatched cash to purported clients, who then returned it to iLearning — to fabricate income.
A minimum of 90% of iLearning’s $421 million of reported income in 2023 was fabricated, the indictment mentioned.
“Whereas the defendants pitched iLearning as a technique to revolutionize coaching and schooling via AI, the really synthetic a part of the defendants’ story was iLearning’s clients and revenues,” U.S. Lawyer Joseph Nocella Jr. in Brooklyn mentioned in an announcement.
The corporate went public in April 2024, and its market worth on the Nasdaq peaked at $1.5 billion earlier than a outstanding short-seller questioned its reported income.
The corporate filed for Chapter 11 safety from collectors in December 2024, and transformed that case to a Chapter 7 liquidation in March 2025.