UK-based AI software startup Builder.ai is facing intense scrutiny following revelations that it allegedly engaged in fake business transactions with Indian tech unicorn VerSe Innovation, in what experts say amounts to corporate “round-tripping”, a practice used to inflate sales without actual business activity.
According to an investigative report by The Economic Times, citing documents reviewed by Bloomberg and corroborated by sources close to the companies, Builder.ai and VerSe Innovation repeatedly billed each other for similar amounts between 2021 and 2024, without any real exchange of services. The apparent intent: to fabricate business growth and deceive potential investors ahead of fundraising rounds and financial evaluations.
What is Round-Tripping?
“Round-tripping” refers to an arrangement where two parties agree to trade services or goods at matching values, often with no actual business substance. It can create a misleading impression of revenue growth on balance sheets, a red flag in accounting ethics and financial transparency.
“This is not just an accounting irregularity; if proven, it reflects deliberate intent to defraud investors and regulators,” said a senior fintech compliance expert on condition of anonymity.
VerSe Innovation Responds
VerSe Innovation, the parent company of Dailyhunt and short-video platform Josh, denied the allegations. Co-founder Umang Bedi told The Economic Times that the claims are “completely baseless,” suggesting the reported transactions may have been misunderstood or misrepresented.
However, Builder.ai has declined to comment publicly since the report surfaced.
A Startup on the Brink of Collapse
Builder.ai was a pioneer in no-code AI-driven app development. What had been the darling of the media and the investor’s favorite is now accused of planning to go bankrupt because of liquidity issues and mounting pressure over supposed financial misconduct.
This scandal could mark a significant blow to the reputation of both companies, especially in India, where VerSe has often been showcased as a success story in the country’s growing digital startup ecosystem.
Implications for India’s Startup Ecosystem
The revelation comes at a sensitive time for the Indian startup sector, which is already grappling with a slowdown in funding, layoffs, and increased investor due diligence. Multiple high-profile startups — from Byju’s to GoMechani, have been called out over governance lapses in the last two years.
“This kind of alleged financial engineering between two major tech companies erodes investor confidence,” said a venture capital analyst at a global fund active in India. “If an established player like VerSe is involved, questions will be raised about the due diligence done in previous funding rounds.”
Regulatory Oversight Ahead?
While Indian regulators like the Ministry of Corporate Affairs (MCA) and the Enforcement Directorate (ED) have recently increased their oversight on startups with FDI exposure, this case may prompt global agencies, including the UK’s Financial Conduct Authority (FCA), to take note, given Builder.ai’s domicile.
There is no confirmation yet whether Indian regulatory bodies have begun any formal probe into VerSe’s role in the transactions.
Builder.ai: On The Verge of Collapse?
With Builder.ai on the verge of collapse and VerSe Innovation under a cloud, this alleged round-tripping episode could become a watershed moment in India’s maturing startup economy, pushing for tighter financial controls, investor accountability, and clearer reporting frameworks.
As the story develops, both startups will likely face deeper scrutiny, not just from regulators, but also from institutional investors who may now demand forensic clarity before writing the next cheque.
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