> 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...
> 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.
> "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?
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.
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
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.
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.
68 comments
> 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...
> 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.
>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.
> "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?
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.
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...
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.