Two individuals of Indian descent working at an artificial intelligence startup called iLearning have been arrested on suspicion of committing fraud. The co-founder and former CEO, Puthugramam “Harish” Chidambaran, and the former CFO, Sayyed Farhan Ali “Farhan” Naqvi, were taken into custody on April 17 and brought before a court. They are accused of deceiving investors and shareholders by allegedly providing false revenue numbers and creating fake contracts.
Established in 2010, iLearning promoted itself as a unique AI platform. According to a statement from the US Department of Justice, the company purportedly generated income by selling licenses for its platforms to clients. However, the authorities claim that iLearning falsified most of its customer relationships and revenue figures.
The startup, before its initial public offering, declared a revenue of $421 million in 2023. Upon going public in April 2024, it received $40 million in loan funding from a financial institution in New York City. An additional $20 million was acquired from another financial entity, leading to iLearning’s shares being listed on the NASDAQ under the symbol “AILE.” Post IPO, the company reached a market capitalization of around $1.5 billion.
US Attorney Joseph Nocella Jr. remarked, “The defendants took advantage of the AI hype to present a positive financial outlook based on falsehoods to investors and lenders.”
Allegations from court documents assert that iLearning falsified all its revenues, with contracts predominantly signed by relatives. For instance, an individual linked to Chidambaran set up bank accounts in the names of supposed iLearning clients. Millions of dollars were transferred from iLearning to an account controlled by this individual, who then circulated the funds through various accounts before returning them to the company. These circular transactions amounted to over $144 million.
Joseph further stated, “Although iLearning was marketed as a revolutionary AI training and education solution, the deceptive part was the existence of its customers and revenues.”
In 2024, an investment research firm uncovered the fraud, triggering a sharp decline in iLearning’s stock value. Subsequently, the company filed for Chapter 11 bankruptcy protection in December 2024, which was later converted to Chapter 7 liquidation in 2025, leading to iLearning’s downfall.