The AI boom has brought with it untold levels of fraud and graft. One of the largest schemes so far, concealed within the record-breaking valuations of the AI hype cycle, was iLearning Engines, a relatively young tech company which quickly scaled itself to a $1.5 billion market cap.
A scathing statement by the US Department of Justice alleges that iLearning, an “out-of-the-box AI platform that empowers customers to ‘productize’ their institutional knowledge,” has been faking “virtually all its customer relationships and revenues” since January 2019.
The DoJ named iLearning founder and CEO Puthugramam “Harish” Chidambaran and CFO Sayyed Farhan Ali “Farhan” Naqvi as co-conspirators in a “continuing financial crimes enterprise,” charging them with a bevy of charges related to securities and wire fraud.
Basically, the federal government alleges the duo hitched a ride on the AI bandwagon in order to dupe investors into believing they were a fast-growing AI upstart. In reality, they say, the vast majority of the company’s on-paper customers — and revenue — were faked.
“As alleged, the defendants exploited investor excitement over the AI boom and presented a rosy financial outlook to investors and lenders that was built on lies,” the DoJ statement reads. “While the defendants pitched iLearning as a way to revolutionize training and education through AI, the truly artificial part of the defendants’ story was iLearning’s customers and revenues.”
Chidambaran was arrested in Maryland last Friday, while Naqvi was arrested in California. The two are alleged to have scraped in millions in stock options, salary, and bonuses. Chidambaran is alleged to have received over $500 million in common stock alone, on top of a $700,000 salary between 2023 and 2024, and $12.5 million in restricted stock units.
The scale of the alleged fraud is dumbfounding: in 2023 alone, the two posted a revenue of $421 million, based on supposed AI licenses iLearning sold to enterprise customers. In reality, the DoJ argues, that revenue was padded “through an intricate web of sham contracts with purported customers,” some of which amounted to tens of millions of dollars every year.
According to the Hill, the FBI’s latest Internet Crime Report identified over 22,000 complaints related to AI fraud in 2025 alone, the losses of which are estimated around $900 million — about a 33 percent increase from the previous year. It seems that until the AI music finally stops, the grifters will keep on dancing all the way to the bank.
More on AI scams: Man Pleads Guilty to Making $8 Million by Creating Music With AI and Using Bots to Drive Zillions of Fake Streams
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