Builder.ai, once one of the AI industry’s fastest-rising startups with a $1.5 billion valuation, has filed for bankruptcy in the U.S.—a collapse triggered by overstated sales and alleged fake revenue.

On June 2, the UK-based company filed a Chapter 7 case in Delaware after creditors seized most of the funds in its bank accounts. It’s now the largest AI company to fail since ChatGPT ignited the generative AI gold rush.

According to Bloomberg, Builder.ai had overstated its 2024 sales projections by 300% and falsely claimed business from Indian tech firm VerSe Innovation to inflate revenue. VerSe has denied the allegations.

Backed by Microsoft, Insight Partners, and Qatar’s sovereign wealth fund, Builder.ai had raised over $450 million in funding. But behind the scenes, its finances were crumbling.

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In February, founder Sachin Dev Duggal stepped down as CEO—though retained the curious title of “chief wizard”—amid growing concerns. His replacement, Manpreet Ratia, brought in auditors to review its 2023–2024 books.

In May, the company warned of imminent insolvency after a creditor group led by Viola Credit seized its remaining cash.

“The business has been unable to recover from historic challenges and past decisions that placed significant strain on its financial position,” Builder.ai told staff in a letter shared with Bloomberg.

The case has become a stark warning of the risks of over-hyped AI investing, where even Microsoft-backed firms can implode under pressure to deliver exponential growth.