Round-tripping allegations: VerSe Innovation refutes charges

Bengaluru-based VerSe Innovation, the parent company of Dailyhunt and Josh, has found itself entangled in a global controversy involving UK-based AI startup Builder.ai. A Bloomberg investigation alleges that between 2021 and 2024, Builder.ai engaged in a multi-year revenue inflation scheme using its partnership with VerSe Innovation. 

Once hailed as a rising AI unicorn with deep links to India’s tech ecosystem, Builder.ai has now reportedly filed for bankruptcy amid mounting allegations of financial misconduct. The episode raises serious concerns about corporate governance and due diligence within the startup landscape.

At the heart of the controversy is a practice known as “round-tripping,” where two companies bill each other similar amounts to fabricate legitimate revenue. According to the report, Builder.ai and VerSe Innovation, along with its subsidiary Quark Media Tech, exchanged nearly $60 million in reciprocal payments—purportedly for services like app development and marketing. 

However, these transactions often lacked any actual delivery of services or products and were allegedly timed and structured to evade scrutiny, the media report claimed.

The fallout has led to key exits, including the resignation of VerSe’s CFO Sandip Basu citing health reasons. 

Meanwhile, Builder.ai's collapse has been dramatic. Once valued at $1.5 billion with over $450 million in funding from investors like Microsoft and Qatar Investment Authority, the company revealed that a major creditor had seized its funds, forcing it to begin insolvency proceedings.

Further deepening the crisis, US prosecutors have subpoenaed Builder.ai for customer lists, financial records, and accounting policies. Bloomberg also reported that the startup had overstated its projected 2024 sales by 300%, allegedly misleading lenders.

VerSe Innovation Denounces Allegations

VerSe Innovation categorically denied all allegations in connection with its commercial dealings with Builder.ai. 

Company founder Umang Bedi, Chief Information Officer Jai Thomas, and Head of Mergers & Acquisitions Abhishek Khaitan opened up their documents before e4m during a virtual meeting, sharing invoices, products, and services received and delivered in connection with Builder.ai.

"We have shown you all evidences of how we did business with Builder.ai. All these documents are dated and part of our accounts. Revenue recorded in our financial statements, including the revenue from Builder.ai, relates to legitimate services rendered and delivered—either directly or through its subsidiaries. Similarly, expenses recorded by VerSe Innovation correspond only to services actually received, including from Builder.ai or its affiliated entities. This has been verified periodically by reputable independent third parties. Hence, media reports are not only factually incorrect and baseless, but also defamatory and misleading," Bedi claimed. 

He added, "In response to any such claims being published or disseminated, VerSe Innovation expressly reserves the right to pursue all appropriate legal remedies, with all consequences borne solely by those responsible."

He added that the company is open to any inquiry, but no authority has approached them to be part of one so far.

When asked about VerSe Innovation's Group CFO's recent exit amid controversy, Bedi said that Sandip Basu departed because of age-related health issues. He is 65 and i facing health issues. 

In a detailed statement later, the company said, "Any insinuation that VerSe Innovation colluded with Builder.ai to inflate revenues, engaged in reciprocal billing without corresponding services, or manipulated invoicing practices to conceal any arrangement or payments were intentionally interspersed in timing and amount of the invoices to avoid suspicion is entirely false, defamatory, and irresponsible. VerSe Innovation rejects any such mischaracterizations and reiterates its commitment to transparency and legal compliance."

"Over the past five years, VerSe Innovation engaged Builder.ai for services including hyperscale cloud deployment and system migration, customized app development and software solutions—at a cumulative spend of USD 80 million. During the same period, Builder.ai engaged VerSe Innovation for advertising services for its products and services, resulting in a total payment of USD 53 million to VerSe Innovation. This balance of trade further disproves any allegation that the payments were of similar amounts and part of any coordinated arrangement or round tripping."

"As part of the statutory audit for FY24, a comprehensive and detailed examination of several transactions—including those involving Builder.ai—was conducted. Each transaction was validated and checked thoroughly, including review of services rendered and delivered, relevant supporting and payments against the same."

"The statutory audit for FY24 concluded with an unqualified opinion from the auditors, confirming a true and fair view of VerSe’s financial statements. While certain internal control weaknesses were noted, these did not impact the unqualified true and fair opinion of the auditors on the financial statements as is self-evident from this opinion."

With this matter clearly behind us, VerSe is now focused on the future - The company remains focused on its near-term goal of achieving breakeven in the second half of the fiscal year and strengthening its internal controls at the same time. This effort is being powered by its next-generation, AI-first product portfolio—including NexVerse.ai, Dailyhunt Premium, Josh Audio Calling & Stories, and VerSe Collab—which are collectively reshaping how consumers, creators, and brands engage within India’s fast-evolving digital economy, the statement reads. 

Builder.ai's response was awaited till the time of writing these lines.