$421M AI business scam: How 2 Indian-origin tech executives ‘inflated’ revenue through ‘sham contracts’ in US

Identified as Puthugramam “Harish” Chidambaran and Sayyed Farhan Ali “Farhan” Naqvi, the top officials were also accused of falsely inflating their now-bankrupt company’s revenue by hundreds of millions of dollars through “sham contracts” with entities they controlled, along with other employees, friends and family members.

Both previously served as the chief executive officer (CEO) and chief financial officer (CFO) of iLearningEngines Inc, respectively. On April 17, the US Justice Department announced in an official news release that Chidambaran was arrested in Potomac, Maryland, earlier that morning, while Naqvi was also taken into custody that same day in San Jose, California.

Indian-origin tech CEO, CFO accused of major AI business fraud

According to the US Justice Department, the “grand jury charges” against Harish Chidambaran and Farhan Naqvi stem from a multi-year scheme to defraud retail and institutional investors in iLearning and obtain financing for the company through false and misleading statements about the firm’s financial performance. As quoted in the news release, United States Attorney Nocella said that the former CEO and CFO of iLearning sought to exploit “investor excitement over the AI boom.”

To achieve this, they allegedly presented a “rosy financial outlook” to investors and lenders. Building their arguments on lies, the defendants positioned the company as capable of revolutionising training and education through artificial intelligence. However, as per Attorney Nocella’s remarks, the most “artificial” part of their story was the company’s customers and revenues.

What is iLearning? ‘False revenues scheme’ exposed

The indictment document and the US Justice Department stated that the Bethesda, Maryland-based company was founded by former CEO Chidambaran in 2010. The organisation presented itself as “an out-of-the-box AI platform that empowers customers to ‘productize’ their institutional knowledge and generate and infuse insights in the flow-of-work to drive mission critical business outcomes.”

As outlined by the Department of Justice (DOJ), iLearning claimed that its primary revenue source was based on the sales of licenses for its platforms to customers. It also claimed to have reported a staggering growth in revenue, hitting $421 million in 2023.

Having become a publicly traded company in April 2024, iLearning additionally obtained $40 million in loan proceeds from a financial institution’s New York City branch. After that, the company reportedly secured another $20 million in loan proceeds from a different NYC branch of a financial institution.

Following the going-public transaction, the tech company’s shares were eventually identified by the ticker symbol “AILE” on the NASDAQ stock exchange. iLearning’s common stock achieved its peak market capitalisation of approximately $1.5 billion in June 2024. However, the problem was that the company had falsely represented nearly all its customer relationships and revenues, information that wasn’t conveyed to the investors and lenders.

The unsealed indictment further alleges that other iLearning employees or their employees posing as senior executives of the purported customers signed the questionable agreements. The deceptive web of lies reportedly concocted by the parties involved then led the Indian-origin defendants and others at the company to create fake information about the purported customers with whom they had signed agreements.

This scheme included creating a website for a shell entity, which was ultimately responsible for deceiving investors and lenders, according to the DOJ. Thus, the officials on the other end of the bargain were led to believe that the company’s customers were real.

How was iLearning’s business scam exposed?

Before the allegations against Chidambaran and Naqvi went public, both Indian-origin men were profiting significantly from the alleged scheme by misrepresenting iLearning’s revenue. While the former tech CEO received over $500 million worth of iLearning common stock and subsequently approximately $12.5 million in iLearning restricted common stock, the ex-CFO secured iLearning common stock worth approximately $11.2 million. The company also paid nearly $4.5 million in cash to cover Naqvi’s tax liabilities.

However, it all started crumbling when an investment research firm issued a report indicating that iLearning had misrepresented its revenue in August 2024. Shortly thereafter, the company’s stock price collapsed, resulting in a substantial erasure of its market value.

According to the US Justice Department, both Chidambaran and Naqvi repeatedly lied to their investors and lenders when confronted about the bombshell report. At the time, they continued to deny that iLearning’s largest purported customer was actually an entity they controlled. Months later, in December 2024, the company ran out of options and was forced to file for Chapter 11 bankruptcy protection in the District of Delaware.

In March 2025, the company converted its bankruptcy petition to a Chapter 7 liquidation, signalling iLearning’s collapse. The development resulted in hundreds of reported unpaid creditors and over $50 million in unpaid liabilities, according to the indictment document filed in Brooklyn.

Other iLearning employees involved in the alleged fraud

While Puthugramam Chidambaran and Sayyed Farhan Ali Naqvi have been named as defendants in the case, the indictment lists at least five other co-conspirators. Although unnamed in the document, these people are known to the Grand Jury as the following:

• Assistant vice president of iLearning, who also presented himself as the CEO of a purported customer
• A company vice president posing as the CEO of multiple purported iLearning customers
• Another individual holding himself out as the CEO of yet another purported customer
• An iLearning employee and relative of another senior iLearning employee playing the part of an executive of several purported customers
• A senior iLearning executive