Justice Department charges top executives of AI company iLearning with financial fraud

U.S. authorities on Friday charged iLearning founder and former CEO Puthugramam "Harish" Chidambaran and CFO Sayyed Farhan Ali "Farhan" Naqvi with 10 federal charges linked to an alleged financial fraud scheme. Those charges include operating a continuing financial crime enterprise, conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud and wire fraud.

As detailed by the Department of Justice in a statement, the company touted itself as a firm with the full ability to "generate and infuse insights in the flow-of-work to drive mission critical business outcomes." Furthermore, the agency explained that while iLearning claimed to generate revenue by licensing its platforms and went on to report nearly $500 million in revenue in 2023, those claims were largely fictitious. In fact, investigators claim the company "fabricated virtually all its customer relationships and revenues."

The case comes amid concern among U.S. authorities over various incidents of fraud linked to artificial intelligence, with the FBI's most recent Internet Crime Report recording more than 22,000 complaints related to AI-linked scams last year. Similarly, the case highlights the growing challenges authorities face in regulating and overseeing the use of new technologies in business, especially in a context where artificial intelligence has generated strong enthusiasm among investors and markets.

"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. While the two 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. Our office is committed to protecting investors and holding accountable corporate executives who undermine the integrity of our financial markets for personal gain," U.S. Attorney Joseph Nocella Jr. said in a statement.