Federal prosecutors say two former iLearningEngines executives ran an elaborate fraud, fabricating customers and revenues, securing loans and a public valuation near $1.5 billion before the company collapsed and went into liquidation.
Federal charges were filed this week in Brooklyn against Puthugramam Chidambaran, 57, of Potomac, Maryland, the founder and former CEO of iLearningEngines, Inc., and Sayyed Farhan Ali Naqvi, 44, of Houston, Texas, the company’s former CFO. Authorities allege the pair orchestrated a years-long scheme that targeted both retail and institutional investors. Arrests took place in Potomac and San Jose, and the defendants are scheduled to appear in the Eastern District of New York at a later date.
The indictment lists a string of offenses including running a continuing financial crimes enterprise, conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud. Prosecutors say the charges arise from the defendants’ years-long scheme to defraud retail and institutional investors in iLearning, a technology company that claimed to provide artificial intelligence-driven business automation solutions, and to obtain financing for iLearning through materially false and misleading statements about the company’s financial performance.
United States Attorney Joseph Nocella, Jr. and the FBI’s New York Field Office announced the charges publicly. “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 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 United States Attorney Nocella.
Court papers describe iLearning as a Bethesda, Maryland-based tech company founded in 2010 by Chidambaran. The company marketed an out-of-the-box AI platform meant to turn institutional knowledge into workflow insights and claimed rapidly growing revenues. iLearning reported revenues that supposedly reached $421 million in 2023, a figure that became central to investor interest.
In April 2024 iLearning went public and soon after secured financing from New York branches of financial institutions, receiving $40 million in loan proceeds and later an additional $20 million. The company’s shares began trading on NASDAQ under the symbol AILE and the market capitalization quickly approached $1.5 billion. Prosecutors contend that these milestones were achieved while the company’s public story diverged sharply from its true operations.
The indictment alleges that virtually all of iLearning’s customer relationships and reported revenues were fabricated. Executives and others are accused of creating sham contracts often valued at tens of millions per year, with signatures manufactured by employees or family members pretending to be customer officers. In some cases shell companies and fake websites were created to support the illusion, and friends or associates were asked to lie to auditors, investors, and lenders.
Prosecutors say the defendants also engaged in round-trip transactions to make revenue appear real, routing investor and lender funds through accounts tied to supposed customers before returning the money to iLearning. An associate who had been a vice president allegedly incorporated entities and opened bank accounts in the names of purported customers to facilitate these transfers. Over time the aggregate value of these round-trip transactions exceeded $144 million, according to the indictment.
An investment research firm published a short-seller report in August 2024 alleging material misrepresentations by iLearning, including undisclosed related-party transactions that inflated reported income. After that report hit the market, iLearning’s stock plunged and much of the company’s market value evaporated. When pressed about the short-seller findings, the indictment claims the defendants repeatedly lied about the nature of relationships with their largest purported customers and directed others to lie on their behalf.
By December 2024 iLearning filed for Chapter 11 bankruptcy in the District of Delaware, and the case was later converted to a Chapter 7 liquidation in 2025. The conversion marked the practical end of the company and the collapse of the valuation that had once topped roughly $1.5 billion. The collapse left lenders and investors scrambling to recover losses tied to the alleged deception.
Despite the collapse, the indictment says both executives reaped substantial personal gains before the company fell apart. In connection with the going-public transaction, Chidambaran allegedly received more than $500 million worth of common stock and about $12.5 million in restricted stock units. Naqvi was awarded common stock valued at approximately $11.2 million, and the company paid nearly $4.5 million in cash to cover his tax liabilities.
The charges remain allegations and the defendants are presumed innocent until proven guilty in court. If convicted on the continuing financial crimes enterprise charge, each faces a mandatory minimum of 10 years imprisonment and up to life. The case is being handled by the Office’s Business and Securities Fraud Section and is being prosecuted by Assistant United States Attorneys Joshua Dugan and Kamil R. Ammari, along with Paralegal Specialist Timothy Migliaro.
