Summary and charges
Federal prosecutors in Brooklyn published a 10-count indictment charging two former senior executives of iLearningEngines with creating phony customer agreements and manufacturing revenue to mislead investors and lenders. The indictment names founder and former chief executive Puthugramam Chidambaran and former chief financial officer Sayyed Farhan Ali Naqvi and accuses them of running a continuing financial crimes enterprise, securities fraud, wire fraud, and conspiracy to commit securities and wire fraud.
Arrests and procedural details
According to prosecutors, Chidambaran, 57, was taken into custody in Potomac, Maryland, where he resides, and Naqvi, 44, was arrested in San Jose, California. The criminal enterprise charge in the indictment carries a potential maximum sentence of life in prison. The indictment was made public on Friday in the Brooklyn, New York, federal court. Lawyers for the defendants did not immediately respond to requests for comment.
Allegations about the company's business and revenue
Prosecutors describe iLearningEngines as a company that marketed itself as an artificial intelligence-driven digital education business offering an out-of-the-box AI platform and said it generated revenue primarily from licensing its educational and training platforms to customers, including healthcare companies and schools. The indictment, however, alleges that the defendants used forged sham contracts to create the appearance of legitimate customers.
To further manufacture revenue, prosecutors allege the defendants employed "round trip" transfers of investor and lender funds. Under that scheme, money was reportedly sent to purported customers and then returned to iLearning in a manner designed to create the false appearance of revenue. The indictment states that at least 90% of the company's $421 million reported revenue for 2023 was fabricated.
Official statement
In a statement, U.S. Attorney Joseph Nocella Jr. of Brooklyn said the company had been presented as a vehicle to transform training and education through artificial intelligence, but that the truly artificial element was the company's customers and revenues.
Corporate timeline
iLearningEngines was founded in 2010. The company went public in April 2024 and saw its market value on the Nasdaq reach a peak of $1.5 billion before a noted short-seller raised questions about its reported revenue. The company sought Chapter 11 protection from creditors in December 2024, and that case was converted to a Chapter 7 liquidation in March 2025.
Context for markets and stakeholders
The indictment and subsequent corporate collapse affected investors, lenders and market participants who relied on the company's reported financials. The allegations center on falsified customer relationships and revenue recognition practices that prosecutors say were used to deceive capital providers and the market.
Next steps
Criminal proceedings will follow the indictment. The defendants face multiple federal charges as described in the 10-count indictment. Prosecutors and defense counsel will proceed through the federal court process in Brooklyn.
Note: This article presents details from the indictment and public filings as made available by prosecutors.