Ex-CEO, ex-CFO of bankrupt AI company charged with fraud

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11vuio0pswjnm7 about 4 hours ago 53 commentsRead Article on reuters.com

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randycupertino•about 3 hours ago

> they defrauded investors and lenders by fabricating "virtually all" of the now-bankrupt company's customer relationships and revenue.

> According to the indictment, the defendants used forged sham contracts to make it seem that iLearning's customers were real, and used "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -- to manufacture revenue.

> At least 90% of iLearning's $421 million of reported revenue in 2023 was fabricated, the indictment said.

> The company went public in April 2024, and its market value on the Nasdaq peaked at $1.5 billion before a prominent short-seller questioned its reported revenue.

For the record the short sellers who blew up the fraud were Hindenburg Research. This is the second AI company they've discovered that is a scam, the other being Super Micro with their chip-selling scam: https://www.forbes.com/sites/tylerroush/2026/03/20/super-mic...

darth_avocado•about 1 hour ago

> used "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -- to manufacture revenue.

They should’ve instead “bought stake” in the customer companies and then asked them to use that money to buy their “product” like the normal trillion dollar companies do.

wrqvrwvq•about 1 hour ago

There is probably some phrase for describing this type of business activity. "If it's sophisticated it's actually legal" (no fault settlement). As a limited legalist this is actually the way it works and it's somewhat normal. A better lawyer provides better advice and steers company activity towards more defensible practice. If all the major ai players want to set money on fire for totally unmaintainable hobbies then so be it.

arikrahman•28 minutes ago

They should've asked their iLearningEngine AI to learn how to sophisticate their process.

cloudbonsai•9 minutes ago

There was a similar case in Japan recently: alt.ai

This company purported to sell AI transcription service. Raised capital from notable local VCs. Did IPO in Oct 2023.

It turned out that more than 90% of its sales were fake. The CXOs were arrested and the company was liquidated last month.

HWR_14•about 2 hours ago

> "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -

I thought a lot of public, high profile, AI adjacent sales were seller financed or financed by the seller investing in the purchaser. Is that the same thing?

dualityoftapirs•about 2 hours ago

I think the issue here isn't that they did seller financing but rather there was not an actual buyer at all.

walrus01•about 3 hours ago

Supermicro isn't an "AI company", it's a Taiwanese origin x86 server/industrial/embedded hardware manufacturer with roots that go back 30 years.

ethanwillis•about 3 hours ago

Unfortunately, in 2026 even shoe companies are "AI companies"

onemoresoop•about 1 hour ago

Half a decade ago they were all blockchain companies. Before that I don’t remember, what was the buzzword, big data?

vrganj•about 2 hours ago

We will never learn our lesson. Humanity just keeps repeating the same mistakes. Remember Long Island Ice Tea / Blockchain?

gnabgib•about 4 hours ago

iLearningEngines .. hindenburg did some research ILearningEngines: An AI SPAC with Artificial Partners and Artificial Revenue (2 years ago) https://news.ycombinator.com/item?id=41390619

shoo•about 2 hours ago

Hindenburg Research is great. They also did the Nikola expose (that bunch of shysters who claimed to have electric truck technology where their truck couldn't even move under its own power so they filmed it rolling down a gentle slope).

For anyone wanting to get into the weeds about detecting accounting fraud, the book "Financial Shenanigans" has lots of historical examples of ways company executives have cooked the books to make their public company financial statements appear more appealing to investors than they actually are.

dmix•about 3 hours ago

Federal investigations always take forever.

bandrami•about 2 hours ago

It's a real problem at this point. People still say "nobody went to jail for the GFC" even though over 200 people did in the US; it's just it took a decade and nobody actually paid attention a decade later when they went to jail.

dghlsakjg•about 1 hour ago

For a multi-trillion dollar fuckup involving an entire industry... that seems low.

lupire•about 1 hour ago

Fall guys.

Highest Profile Individuals Convicted Kareem Serageldin (Credit Suisse): Widely recognized as the only high-level Wall Street executive to serve prison time directly related to the GFC.

yalogin•about 2 hours ago

Unfortunately there is a real chance they get pardoned or just their cars dropped for a small sum of 1-5 million dinner.

onemoresoop•about 1 hour ago

The unscrupulous in the white house will take your money (for a pardon) no matter what the crime.

burnt-resistor•26 minutes ago

No, no, no... money doesn't change hands directly. It's investment in the regime's crypto coin in the proper amount.

nickpinkston•about 2 hours ago

Play with fire, and you get burned...

These scams are all too frequent today, and putting these guys and others like them in prison would act as a deterrent.

We'll see if our system can actually hold any white collar criminals accountable though...

jandrewrogers•about 2 hours ago

A lot of these people do go to prison but know one pays attention long enough to notice.

This same scam was common during the dotcom boom in the 1990s. A lot of people went to prison but every generation needs to learn this lesson the hard way apparently.

markdown•about 1 hour ago

They couldn't buy pardons in the 90's like they can in 2026. Nobody is going to prison.

wrqvrwvq•38 minutes ago

great to insert partisan talking points here. the last admin has no culpability so this is a great argument. thanks.

bandrami•about 2 hours ago

If they arrest everyone who does a wash transaction to generate the appearance of revenue there aren't going to be many founders left standing in 2026.

sharts•about 2 hours ago

amd that’s probably good

mandeepj•about 3 hours ago

Using the right channels, they can buy a pardon. Let's see how it unfolds.

da_chicken•about 3 hours ago

No, that seems unlikely. They committed the cardinal sin of stealing from the rich.

dylan604•about 2 hours ago

Also probably why SBF is yet to be pardoned

wj•about 2 hours ago

He was a big supporter of the Democratic Party which would not necessarily lead to a pardon with the Republican administration.

vkou•43 minutes ago

Trevor Milton received an unconditional pardon for his Nikola fraud last year.

Trump has no problem selling pardons to people who stole from the rich. It's a big club, and he's open for business.

PedroBatista•about 2 hours ago

It appears what really ended their little scam was the $421 million of reported revenue based on complete lies.

Because lying to investors about product hasn't been really an issue lately, even Intel ~5 years ago did some presentations that were a complete fantasy back when they were desperate to keep their stock value but could not produce a chip smaller than 14nm.

If they prosecute CEOs based on lies to investors other than accounting, almost all AI startups would go down.

ralph84•about 1 hour ago

CEOs can say basically anything when it's talking about the future. They just have to include a safe harbor disclaimer about forward-looking statements.