Former iLearningEngines executives charged in alleged investor fraud scheme

Federal prosecutors in Brooklyn accused two former iLearningEngines executives of building an AI success story on fake customers, fake contracts and fake revenue, saying the company’s reported growth helped lure investors and lenders before the business collapsed into bankruptcy.

A ten-count indictment unsealed Friday charged Puthugramam “Harish” Chidambaran, the founder and former chief executive, and Sayyed Farhan Ali “Farhan” Naqvi, the former chief financial officer, with running a continuing financial crimes enterprise, conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud and wire fraud. Chidambaran was arrested in Potomac, Maryland, and Naqvi was arrested in San Jose, California, as the case moved forward in federal court.

Prosecutors say iLearningEngines, a company that marketed itself as an AI-driven business automation platform, falsely inflated revenue by hundreds of millions of dollars through sham contracts with entities controlled by the defendants, other employees, friends and family members. The indictment alleges that at least 90% of the company’s reported $421 million in 2023 revenue was fabricated, using forged contracts and round-trip transfers of investor and lender money to make fake customer payments appear real.

U.S. Attorney Joseph Nocella Jr. said the defendants “exploited investor excitement over the AI boom” and described the company’s presentation as built on lies. He said that while iLearningEngines pitched itself as a way to transform training and education through AI, “the truly artificial part of the defendants' story was iLearning's customers and revenues.”

The charges land in the middle of a broader reckoning over AI-branded companies that can command premium valuations long before their economics are fully tested. iLearningEngines went public in April 2024 through a SPAC transaction that valued the combined company at $1.4 billion, then climbed to a market value of about $1.5 billion before a short-seller questioned its numbers. By December 20, 2024, the company had filed for Chapter 11 protection in Delaware, and that case later converted to Chapter 7 liquidation in March 2025.

The collapse now frames the fraud case as more than a set of bad books. Hindenburg Research said iLearningEngines was incorporated in 2010, underscoring that it was not a fresh startup suddenly swept up in the AI boom but an older company that successfully rebranded itself for the market. Prosecutors say that branding effort masked a business whose reported performance was largely manufactured, a warning for investors and lenders chasing AI growth stories without enough scrutiny.