Federal prosecutors have arrested two former executives of an artificial intelligence company, accusing them of orchestrating an elaborate scheme that fabricated hundreds of millions of dollars in fake revenue.
Puthugramam Chidambaran, 57, who founded iLearningEngines in 2010 and served as its chief executive, was taken into custody at his Potomac, Maryland home. Former chief financial officer Sayyed Farhan Naqvi, 44, was arrested in San Jose, California, though he resides in Houston.
A federal grand jury in Brooklyn handed down a 10-count indictment Friday, charging both men with operating a continuing financial crimes enterprise, securities fraud, wire fraud, and conspiracy. The most serious charge could result in life imprisonment.
Defense attorneys for both executives have not yet responded to media inquiries about the charges.
According to federal authorities, iLearningEngines promoted itself as a cutting-edge artificial intelligence company specializing in digital education solutions with an advanced AI platform. The business claimed to generate income primarily through licensing its educational and training software to healthcare organizations and educational institutions.
However, the indictment alleges the executives created fraudulent contracts to simulate legitimate customer relationships and established circular money transfers where investor funds were sent to supposed clients, who then returned the same money to create the appearance of genuine revenue.
Federal prosecutors claim that more than 90% of the company’s reported $421 million in 2023 revenue was completely fabricated.
“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,” stated U.S. Attorney Joseph Nocella Jr. in Brooklyn.
The company launched its initial public offering in April 2024, reaching a peak market capitalization of $1.5 billion on the Nasdaq exchange before a well-known short-seller raised questions about the legitimacy of its reported earnings.
iLearningEngines sought Chapter 11 bankruptcy protection in December 2024 and subsequently converted to Chapter 7 liquidation proceedings in March 2025.
