Builder.ai, a London-based artificial intelligence startup once valued at $1.5 billion and backed by Microsoft, has filed for bankruptcy after revelations that its core technology relied heavily on manual labor rather than AI.The company had marketed its AI-powered app development tool, ‘Natasha’, as a revolutionary system capable of autonomously designing and coding software at high speed.However, investigations revealed that the majority of the work was performed by a team of over 700 human engineers based in India, with minimal AI involvement.Bloomberg also uncovered questionable financial dealings between Builder.ai and Indian social media firm VerSe, including allegedly inflated invoices exchanged between 2021 and 2024 to artificially enhance revenue figures. VerSe has denied any wrongdoing, calling the allegations “baseless and false.”Read more: Artificial intelligence spells danger for Hollywood stunt workersThe eight-year-long practice of misrepresenting human-powered work as AI-driven came to light in May 2025, leading to a swift downfall of the company.In a statement posted on LinkedIn, Builder.ai confirmed it was entering insolvency proceedings, citing “historic challenges and past decisions” as reasons for its financial collapse.The scandal has intensified calls for greater transparency in the AI sector, as investor enthusiasm continues to fuel rapid growth and billion-dollar valuations in emerging tech companies.