Bengaluru-based VerSe Innovation, the parent firm of news aggregator platform Dailyhunt, and London-based artificial intelligence startup Builder.ai allegedly inflated revenue by issuing invoices to each other without services being provided in many of those cases, a Bloomberg report said.
The two companies routinely billed one another for roughly the same amounts between 2021 and 2024, the news agency reported citing documents it reviewed, adding that Builder.ai collected close to $60 million in revenue from VerSe in the four-year period for services such as application development.
VerSe Innovation cofounder and CEO Umang Bedi, terming the allegations “factually incorrect and baseless”, told ET that the amount invoiced and accounted for as revenue in its financial statements by the company was against “services that VerSe (or a relevant subsidiary) rendered and delivered to Builder.ai”.
“Similarly, VerSe has accounted as an expense, in VerSe’s financial statements, only for services that it in fact received from Builder.ai or its relevant subsidiary. All these services have also been verified from time to time by reputable external organisations,” he said.
Explaining the nature of these services, Bedi said that Builder.ai provided cloud compute services to VerSe, which amounted to $80 million for the 2020-25 period. On the other hand, the London-based startup availed advertising services from VerSe for around $50 million during this period.
In 2021 and 2022, VerSe Innovation raised a total of about $1.5 billion in capital from marquee investors such as Canada Pension Plan Investment Board (CPP Investments), Ontario Teachers' Pension Plan Board (Ontario Teachers’), Luxor Capital, Sofina, The Carlyle Group, Alpha Wave, Google and Microsoft.
Microsoft is also a backer of Builder.ai, which itself filed for bankruptcy in May after one of its large lenders seized most of its cash. This was preceded by the $1.5-billion valued startup’s admission that it overstated its sales to creditors. In the US, prosecutors have also subpoenaed the company demanding that it hand over financial statements, accounting policies and a list of customers.
Citing people in the know and documents, Bloomberg reported that the two companies appear to have interspersed the timing and amount of the invoices to avoid suspicion, though each firm ultimately spent approximately the same amount.
“Any suggestion that Builder.ai and VerSe coordinated with one another to inflate sales figures or that they routinely billed one another for roughly the same amount or that products and services weren’t actually provided against payments made or that there was a practice of reporting bogus revenue in coordination or that payments were intentionally interspersed in timing and amount of the invoices to avoid suspicion, are not only baseless and factually incorrect but also defamatory and irresponsible,” Bedi said on these allegations.
For VerSe Innovation, the reports of alleged “round-tripping” of money with Builder.ai comes close on the heels of audit firm Deloitte flagging lack of “appropriate internal controls” as part of its opinion on the company’s 2023-24 financials. The Big Four firm weaknesses in internal controls over several aspects of VerSe Innovation’s business, including its advertising revenue and relationship with suppliers.
These gaps, Deloitte said, “could potentially result in material misstatement” of VerSe Innovation’s account. Bedi said that while “weaknesses were noted in certain internal controls, the statutory auditors have clearly opined that these weaknesses ‘do not affect our opinion on the said consolidated financial statements of the company’”.
In its annual financial statements for 2023-24, VerSe Innovation had updated its financials for the previous fiscal -- adjusting its total income to Rs 1,356 crore from Rs 1,809 crore filed with its 2022-23 statements. Deloitte had highlighted the changes in the figures reported for 2022-23, while also flagging an unsubstantiated claim of Rs 35 crore connected to unexplained invoices from a supplier which the company did not recognise as a trade payable. The company had said that the restatement in revenue for 2022-23 was because of adjustments made on account of adoption of Indian Accounting Standards.
Also Read: ETtech Explainer: Why AI startup Builder. ai is filing for bankruptcy despite backing from Microsoft and QIA
The two companies routinely billed one another for roughly the same amounts between 2021 and 2024, the news agency reported citing documents it reviewed, adding that Builder.ai collected close to $60 million in revenue from VerSe in the four-year period for services such as application development.
VerSe Innovation cofounder and CEO Umang Bedi, terming the allegations “factually incorrect and baseless”, told ET that the amount invoiced and accounted for as revenue in its financial statements by the company was against “services that VerSe (or a relevant subsidiary) rendered and delivered to Builder.ai”.
“Similarly, VerSe has accounted as an expense, in VerSe’s financial statements, only for services that it in fact received from Builder.ai or its relevant subsidiary. All these services have also been verified from time to time by reputable external organisations,” he said.
Explaining the nature of these services, Bedi said that Builder.ai provided cloud compute services to VerSe, which amounted to $80 million for the 2020-25 period. On the other hand, the London-based startup availed advertising services from VerSe for around $50 million during this period.
In 2021 and 2022, VerSe Innovation raised a total of about $1.5 billion in capital from marquee investors such as Canada Pension Plan Investment Board (CPP Investments), Ontario Teachers' Pension Plan Board (Ontario Teachers’), Luxor Capital, Sofina, The Carlyle Group, Alpha Wave, Google and Microsoft.
Microsoft is also a backer of Builder.ai, which itself filed for bankruptcy in May after one of its large lenders seized most of its cash. This was preceded by the $1.5-billion valued startup’s admission that it overstated its sales to creditors. In the US, prosecutors have also subpoenaed the company demanding that it hand over financial statements, accounting policies and a list of customers.
Citing people in the know and documents, Bloomberg reported that the two companies appear to have interspersed the timing and amount of the invoices to avoid suspicion, though each firm ultimately spent approximately the same amount.
“Any suggestion that Builder.ai and VerSe coordinated with one another to inflate sales figures or that they routinely billed one another for roughly the same amount or that products and services weren’t actually provided against payments made or that there was a practice of reporting bogus revenue in coordination or that payments were intentionally interspersed in timing and amount of the invoices to avoid suspicion, are not only baseless and factually incorrect but also defamatory and irresponsible,” Bedi said on these allegations.
For VerSe Innovation, the reports of alleged “round-tripping” of money with Builder.ai comes close on the heels of audit firm Deloitte flagging lack of “appropriate internal controls” as part of its opinion on the company’s 2023-24 financials. The Big Four firm weaknesses in internal controls over several aspects of VerSe Innovation’s business, including its advertising revenue and relationship with suppliers.
These gaps, Deloitte said, “could potentially result in material misstatement” of VerSe Innovation’s account. Bedi said that while “weaknesses were noted in certain internal controls, the statutory auditors have clearly opined that these weaknesses ‘do not affect our opinion on the said consolidated financial statements of the company’”.
In its annual financial statements for 2023-24, VerSe Innovation had updated its financials for the previous fiscal -- adjusting its total income to Rs 1,356 crore from Rs 1,809 crore filed with its 2022-23 statements. Deloitte had highlighted the changes in the figures reported for 2022-23, while also flagging an unsubstantiated claim of Rs 35 crore connected to unexplained invoices from a supplier which the company did not recognise as a trade payable. The company had said that the restatement in revenue for 2022-23 was because of adjustments made on account of adoption of Indian Accounting Standards.
Also Read: ETtech Explainer: Why AI startup Builder. ai is filing for bankruptcy despite backing from Microsoft and QIA
You may also like
Underrated UK seaside town is completely 'overlooked' but full of charm
5 Things To Do If You Feel Exhausted During Your Weight Loss Journey
Arsenal boss Mikel Arteta should copy Liverpool and Man City to win Premier League title
Luis Enrique has dig at Kylian Mbappe in final word after PSG win Champions League
HMRC sending new tax codes to people with savings
