> 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 2 days 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.
I completely missed that s4 aired earlier this year. I'm so glad I saw this comment.
wrqvrwvq 2 days 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 2 days ago [-]
They should've asked their iLearningEngine AI to learn how to sophisticate their process.
protocolture 2 days ago [-]
>Super Micro with their chip-selling scam
"Scam"
They sold chips to someone the government is mad at. Thats not really on the same level.
HWR_14 2 days 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 2 days ago [-]
I think the issue here isn't that they did seller financing but rather there was not an actual buyer at all.
delusional 2 days ago [-]
No. If I sent you $100 you'd probably send that $100 back, since you didn't expect then and have no reason to accept money from me. If I now go to a third party and don't tell them about how I sent you money, I have a legitimate transfer receipt for you sending me $100.
Its both a fraud on the third party, whom I have provided incomplete information. But also on you, who have become an unwitting accomlish in my scam, at least from the point of view of the third party.
HWR_14 23 hours ago [-]
That's what they meant by "round trip" transactions? Literally sending them a check and waiting for them to return it? And no other business relationship? And then lying about it using the received check?
That must be one of the least helpful new sentences I've read in a while. I thought it just meant they were seller financing all their customers by loaning them the money and they had gotten zero real revenue.
delusional 23 hours ago [-]
Well in this case it looks like it was just regular double sided fraud. They opened bank accounts in fake names and bought their own product to boost revenue. Much less interesting.
> an associate of Chidambaran, who previously worked as an iLearning vice president, incorporated and opened bank accounts in the names of several purported iLearning customers. Over the course of several years, the defendants transmitted millions of dollars from iLearning to an account controlled by this individual. This individual then sent those funds to other accounts he controlled in the names of other entities, before ultimately sending the money back to iLearning. The aggregate value of these round-trip transactions exceeded $144 million.
cloudbonsai 2 days 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.
Personally I never get the appeal of going public on fake sales. By design, the amount you need to fake grows bigger and bigger over time. So the collapse is inevitable.
threethirtytwo 2 days ago [-]
They take home a salary which they pay themselves and is very likely quite hefty.
walrus01 2 days 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 2 days ago [-]
Unfortunately, in 2026 even shoe companies are "AI companies"
onemoresoop 2 days ago [-]
Half a decade ago they were all blockchain companies. Before that I don’t remember, what was the buzzword, big data?
jordanb 2 days ago [-]
Extremely briefly: metaverse. But yeah before that big data and SaaS had quite a run.
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 2 days 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 2 days ago [-]
Federal investigations always take forever.
bandrami 2 days 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.
chollida1 2 days 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.
Did over 200 people in the US go to jail for the GFC? I just tried looking and I only see 1 person in the US. Iceland had about 25.
dghlsakjg 2 days ago [-]
For a multi-trillion dollar fuckup involving an entire industry... that seems low.
bandrami 2 days ago [-]
TARP still has active IGs; if you know of criminal activity they missed you can report it to them.
vkou 2 days ago [-]
The pain was multi-trillion, but the original fraud that caused the collapse wasn't.
lupire 2 days 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.
bandrami 2 days ago [-]
No that's still about a decade out of date. TARP jailed IIRC 30 bank CEOs, it's just the cases took until 2017 or so and the meme had already implanted itself in people's brains. DoJ got so tired of people saying this that they put a database of all their convictions up but unfortunately it got DOGEd last year.
Many of the TARP convictions (the ones that involved the SEC) can still be found here, though:
Very cool website. Looking through a few of those examples, holy Jesus there is a lot of fraud out there.
Fun read.
bandrami 1 days ago [-]
I'm sad DOGE killed the TARP litigation database because there was some wild stuff on it
dpkirchner 2 days ago [-]
What about the fraud that led up to the GFC -- pre-TARP? I think that's what people meme about.
bandrami 1 days ago [-]
The TARP investigations jailed people for that; that was it's main purpose. Taking the funding window required an audit, and people either lied on the audit (and got busted for that) or admitted to illegal lending or valuation on it (and got busted for that)
2 days ago [-]
yalogin 2 days 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 2 days ago [-]
The unscrupulous in the white house will take your money (for a pardon) no matter what the crime.
burnt-resistor 2 days ago [-]
No, no, no... money doesn't change hands directly. It's investment in the regime's crypto coin in the proper amount.
nickpinkston 2 days 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 2 days 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 2 days ago [-]
They couldn't buy pardons in the 90's like they can in 2026. Nobody is going to prison.
wrqvrwvq 2 days ago [-]
great to insert partisan talking points here. the last admin has no culpability so this is a great argument. thanks.
bandrami 2 days 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.
N_Lens 2 days ago [-]
When Armstrong's Tour de France doping was finally caught, the top 22 placed racers were all doping. It was the 23rd placed racer that was reportedly clean, and got the eventual first place.
sharts 2 days ago [-]
amd that’s probably good
b3ing 2 days ago [-]
Pardon coming soon in 2027
mandeepj 2 days ago [-]
Using the right channels, they can buy a pardon. Let's see how it unfolds.
da_chicken 2 days ago [-]
No, that seems unlikely. They committed the cardinal sin of stealing from the rich.
dylan604 2 days ago [-]
Also probably why SBF is yet to be pardoned
wj 2 days ago [-]
He was a big supporter of the Democratic Party which would not necessarily lead to a pardon with the Republican administration.
zzrrt 2 days ago [-]
Eric Adams is a Democratic politician, whom Trump's DOJ dropped charges for political favors from Adams. For the right bargain they don't even care about the party.
stingraycharles 2 days ago [-]
He supported both parties.
2 days ago [-]
vkou 2 days 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 2 days 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 2 days 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.
2 days ago [-]
immanuelis 1 days ago [-]
[dead]
moomoo11 2 days ago [-]
[flagged]
add-sub-mul-div 2 days ago [-]
Because you fixate on the narrative you want to see and ignore the scamming being done by groups you're sympathetic to.
ChrisMarshallNY 2 days ago [-]
I think most of the stories I’ve read, lately, are about good old-fashioned WASPs. Some, from fairly wealthy backgrounds.
But it will generally be reflective of the main demographic; as that affects the sample size.
I’ve learned that anyone can become a grifter, but the best ones are attractive and articulate.
markdown 2 days ago [-]
> Why’s it almost always south asians
It isn't. It's very rarely south asians.
valianteffort 2 days ago [-]
[flagged]
miltava 2 days ago [-]
How many big fraud cases happened in the US over the last decade? I can think of many of them. Would u say that it’s a cultural thing in the US because of that? So ur statement is more about prejudice than anything.
hennell 2 days ago [-]
Someone call the Olympics because this is the largest jump I've ever seen.
himata4113 2 days ago [-]
there's x evil people per million in every country, india just happens to have a lot of people. china tends to keep things within their borders.
gnz11 2 days ago [-]
I suppose it's a cultural thing for Americans then too, given the current White House occupant? I don't know, maybe every culture just has their share of shitty people.
mandeepj 2 days ago [-]
> given the current White House occupant
Just listen to him speak from a podium in a red state while claiming start of a golden age, revenue of $18 trillion from tariffs, and we won in Iran, at least 50% of the crowd starts clapping. Makes me feel either I'm living in an alternate world or they are.
ellenhp 2 days ago [-]
I don't know how much it has to do with the administration and the top-level comment here was flagged so I'm lacking context but American exceptionalism is instilled here from birth so it does not surprise me in the slightest that founders grow up with the idea that they are built different and destined to change the world. Acting out the fantasy via fraud takes a special kind of person. It's not clear to me whether the dishonesty is uniquely American but I somewhat doubt it. The color of the delusion is, however.
hank808 2 days ago [-]
iLearningEngines? I guess we're all familiar with them and have thoughts and concerns about them. We don't. We're not.
Rendered at 17:09:10 GMT+0000 (UTC) with Wasmer Edge.
> 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...
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.
"Scam"
They sold chips to someone the government is mad at. Thats not really on the same level.
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?
Its both a fraud on the third party, whom I have provided incomplete information. But also on you, who have become an unwitting accomlish in my scam, at least from the point of view of the third party.
That must be one of the least helpful new sentences I've read in a while. I thought it just meant they were seller financing all their customers by loaning them the money and they had gotten zero real revenue.
> an associate of Chidambaran, who previously worked as an iLearning vice president, incorporated and opened bank accounts in the names of several purported iLearning customers. Over the course of several years, the defendants transmitted millions of dollars from iLearning to an account controlled by this individual. This individual then sent those funds to other accounts he controlled in the names of other entities, before ultimately sending the money back to iLearning. The aggregate value of these round-trip transactions exceeded $144 million.
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.
Personally I never get the appeal of going public on fake sales. By design, the amount you need to fake grows bigger and bigger over time. So the collapse is inevitable.
Some things will never change
https://worldstats.io/clock
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.
Did over 200 people in the US go to jail for the GFC? I just tried looking and I only see 1 person in the US. Iceland had about 25.
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.
Many of the TARP convictions (the ones that involved the SEC) can still be found here, though:
https://www.sec.gov/enforcement-litigation/litigation-releas...
Fun read.
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...
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.
Trump has no problem selling pardons to people who stole from the rich. It's a big club, and he's open for business.
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.
But it will generally be reflective of the main demographic; as that affects the sample size.
I’ve learned that anyone can become a grifter, but the best ones are attractive and articulate.
It isn't. It's very rarely south asians.
Just listen to him speak from a podium in a red state while claiming start of a golden age, revenue of $18 trillion from tariffs, and we won in Iran, at least 50% of the crowd starts clapping. Makes me feel either I'm living in an alternate world or they are.