Two Indian American executives have been charged with orchestrating a multimillion-dollar fraud scheme involving inflated revenues at their AI technology company, iLearning Engines.
Two Indian American executives from iLearning Engines, a Maryland-based technology firm that promoted itself as an “out-of-the-box AI platform,” have been charged with running a multimillion-dollar scam aimed at defrauding investors and lenders.
A ten-count indictment against Puthugramam “Harish” Chidambaran, the founder and former CEO of iLearning Engines, and Sayyed Farhan Ali “Farhan” Naqvi, the former CFO, was unsealed in federal court in Brooklyn on April 17.
The charges stem from a years-long scheme in which the defendants allegedly misled retail and institutional investors about the company’s financial performance to secure financing, according to a media release from the U.S. Attorney’s Office for the Eastern District of New York.
Chidambaran, 57, was arrested on the morning of April 17 in Potomac, Maryland, while Naqvi, 44, was apprehended the same day in San Jose, California. Both are scheduled to appear in federal court in the Eastern District of New York at a later date.
“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,” stated Joseph Nocella, Jr., U.S. Attorney for the Eastern District of New York. “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.”
The indictment claims that iLearning reported revenues primarily generated from selling licenses for its platforms, boasting rapidly growing revenues that allegedly reached $421 million in 2023.
In April 2024, iLearning became a publicly traded company. Following its initial public offering, the company’s shares began trading on NASDAQ, quickly achieving a market capitalization of approximately $1.5 billion.
However, unbeknownst to investors and lenders, the defendants allegedly inflated iLearning’s revenues through a complex network of sham contracts with supposed customers, often valued at tens of millions of dollars each year.
In August 2024, an investment research firm released a report alleging that iLearning had materially misrepresented its revenue, including attributing a significant portion of its reported income to undisclosed related-party transactions.
Following the publication of this report, iLearning’s stock price plummeted, erasing a substantial portion of its market value. Ultimately, iLearning filed for Chapter 11 bankruptcy protection in the District of Delaware in December 2024, which was later converted to a Chapter 7 liquidation in 2025, marking the company’s collapse.
Prior to iLearning’s downfall, Chidambaran reportedly received over $500 million worth of iLearning common stock in connection with the company’s public offering. Naqvi was awarded approximately $11.2 million in common stock, and iLearning also paid nearly $4.5 million in cash to cover his tax liabilities.
The case highlights the risks associated with the rapidly evolving AI sector, where investor enthusiasm can sometimes overshadow due diligence. As the legal proceedings unfold, the implications of this case may resonate throughout the tech industry.
According to The American Bazaar, the charges against Chidambaran and Naqvi underscore the importance of transparency and integrity in financial reporting, particularly in high-stakes sectors like artificial intelligence.