Builder.ai and DailyHunt parent VerSe allegedly engaged in $60M round-tripping

Builder.ai, the once high-flying AI startup now reportedly preparing to file for bankruptcy, has allegedly been involved in a years-long revenue inflation scheme, involving VerSe Innovation—the social media unicorn behind DailyHunt.

Between 2021 and 2024, the two companies allegedly engaged in “round-tripping”—a practice where companies bill each other for similar amounts to create the illusion of legitimate revenue, according to a report by Bloomberg.

Reports indicate that many of these transactions did not involve any actual exchange of services or products, raising serious questions about the legitimacy of Builder.ai’s financial statements during its fundraising years.

According to the report, documents reveal nearly $60 million in reciprocal payments between Builder.ai and VerSe Innovation and its subsidiary Quark Media Tech. These payments, covering everything from app development to marketing services, were allegedly timed and staggered to avoid detection. However, they appear to offset each other out in total value—classic indicators of round-tripping.

VerSe has denied the allegations and issued a statement, which has been published as-is:

“At the outset we deny all the allegations, express or implied, against VerSe as being factually incorrect and baseless.

What VerSe invoiced and accounted for as revenue in its financial statements, are against services that VerSe (or a relevant subsidiary) rendered and delivered to Builder.ai. Similarly, VerSe has accounted as an expense, in VerSe’s financial statements only for services that it in fact received from Builder.ai or its relevant subsidiary. All these services have also been verified from time to time by reputable external organizations.

Accordingly, any suggestion that Builder.ai and VerSe coordinated with one another to inflate sales figures or that they routinely billed one another for roughly the same amount or that products and services weren’t actually provided against payments made or that there was a practice of reporting bogus revenue in coordination or that payments were intentionally interspersed in timing and amount of the invoices to avoid suspicion, are not only baseless and factually incorrect but also defamatory and irresponsible.

The statutory auditors have in fact opined that the financial statements for FY 2013-24 provide a true and fair view; meaning that no material misstatements have been identified by the statutory auditors in the said financial statements during the course of the audit. Although weaknesses were noted in certain internal controls, the statutory auditors have clearly opined that these weaknesses “do not affect our opinion on the said Consolidated Financial Statements of the Company.”

Compounding the controversy, VerSe Innovation—parent of news aggregator Dailyhunt and TikTok rival Josh—has faced its own share of scrutiny. In its FY24 audit, Deloitte issued an unqualified opinion on the financial statements, but delivered a scathing adverse opinion on internal controls, according to The CapTable.

A report by Deloitte found that Builder.ai lacked adequate internal controls across multiple areas, including supplier payments with unauthorised purchase orders and unverified payments, revenue recognition with ad revenue recorded without formal contracts based on informal release orders, digital asset management with insufficient oversight around crypto and AI investments.

The company’s IT systems were also flagged for serious lapses, including weak access controls and missing audit trails. Additionally, its accounting software lacked a database-level audit trail for revenue records.

In a troubling turn, VerSe restated its FY23 revenue downward in its FY24 filings, reducing the figure from Rs 1,456 crore to Rs 1,104 crore. FY24 revenue came in even lower at Rs 1,029 crore—a significant gap from the upbeat public narrative of 75% growth earlier put out by the company.

Bedi attributed the changes to compliance with Ind AS 115 accounting standards, stating that the shift from gross to net revenue reporting was a technical accounting decision with no incentive model or wrongdoing involved.

Following the audit, VerSe’s Chief Financial Officer Sandip Basu resigned, citing health reasons. Deloitte also exited as the auditor, reportedly as part of routine auditor rotation requirements under Indian law, though the timing of these resignations has raised eyebrows given the severity of the audit findings.

Builder.ai’s situation presents an even starker collapse. Once valued at $1.5 billion after raising over $450 million from investors including Microsoft, Insight Partners, and Qatar Investment Authority, the company disclosed that a major creditor had seized its funds, prompting the board to pursue insolvency.

US prosecutors have since subpoenaed the company for customer lists, accounting policies, and financial records. Bloomberg previously reported that Builder.ai overstated projected 2024 sales by 300%, misleading lenders in the process.

(The copy was updated with VerSe’s response.)