VerSe Innovation rejects revenue manipulation claims in Builder.ai scandal

New Delhi: VerSe Innovation, the parent company of the Indian news aggregator Dailyhunt and short-video platform Josh, has denied allegations of engaging in revenue manipulation through a "round-tripping" scheme with London-based AI startup Builder.ai. 

The accusations, first reported by Bloomberg, claim that between 2021 and 2024, the two companies exchanged invoices for roughly equal amounts, totalling approximately $60 million in revenue for Builder.ai, without providing corresponding services, to inflate sales figures and mislead investors.

VerSe Innovation’s co-founder and CEO, Umang Bedi, called the allegations “absolutely baseless and false,” emphasising that all transactions with Builder.ai were legitimate and supported by verifiable services. 

According to Bedi, VerSe spent $80 million on Builder.ai’s services, including hyperscale cloud deployment, system migration, and customised app development, while Builder.ai paid VerSe $53 million for advertising services over the same period. “We’re not the kind of company that is in the business of inflating revenues,” Bedi stated in an interview, adding that all recorded revenues and expenses were verified by reputable third-party auditors.

The controversy comes as Builder.ai, once valued at $1.5 billion and backed by investors like Microsoft and the Qatar Investment Authority, faces bankruptcy proceedings following financial mismanagement and governance issues. 

Bloomberg’s report, citing internal documents and anonymous sources, alleged that the two companies interspersed the timing and amounts of invoices to avoid suspicion, a practice known as round-tripping. 

In a statement, VerSe Innovation condemned the allegations as “defamatory and irresponsible,” asserting its commitment to transparency and legal compliance. 

The company highlighted its focus on achieving breakeven in the second half of FY25 and advancing its AI-driven product portfolio, including NexVerse.ai, Dailyhunt Premium, Josh Audio Calling, and VerSe Collab.

The allegations follow scrutiny of VerSe’s financial practices by audit firm Deloitte, which flagged weaknesses in internal controls in the company’s 2023-24 financial statements. 

Deloitte noted issues with information technology, advertising revenue, and supplier relationships but signed off on the accounts as “true and fair.” VerSe also restated its 2022-23 revenue from Rs 1,809 crore to Rs 1,356 crore, attributing the adjustment to the adoption of Indian Accounting Standards. An unsubstantiated claim of Rs 35 crore in invoices from a supplier was not recognised as a trade payable, further raising questions about internal processes.

Builder.ai, which has remained largely silent on the allegations, is under additional pressure after reports surfaced that it overstated revenues by up to 300% and relied heavily on human engineers rather than AI for its software development, despite its AI-driven branding. 

“Any suggestion that VerSe coordinated with Builder.ai to inflate sales figures or engaged in reciprocal billing without services is entirely false,” Bedi reiterated, addressing concerns raised by Bloomberg’s findings. The company is now working to strengthen internal controls while maintaining its focus on growth in India’s digital market.

Neither VerSe nor Builder.ai has faced formal legal action related to the allegations as of now, but the controversy continues to draw attention to the challenges of maintaining integrity in high-growth tech ventures.