90% of this AI company's revenue was fake, feds say

Former iLearningEngines CEO and CFO have been charged with fraud after prosecutors allege they fabricated roughly 90% of the company's $421 million reported revenue in 2023. The indictment says the executives created forged contracts and ran "round trip" transfers, sending investor and lender money to fake customers who then returned it as revenue. About $379 million was fictional.

The company went public through a SPAC merger in April 2024. Peaked at a $1.5 billion Nasdaq valuation. Then Hindenburg Research published a report titled "ILearningEngines: An AI SPAC with Artificial Partners and Artificial Revenue," and the whole thing collapsed. The company is now bankrupt.

Two AI fraud cases caught by the same short-seller is a pattern worth watching. The SPAC pipeline has always been a shortcut to public markets with less scrutiny, and the AI investment boom has made investors hungry enough to overlook valuation expectations. When almost all of a company's revenue turns out to be fake, the due diligence questions write themselves.