> they defrauded investors and lenders by fabricating "virtually all" of the now-bankrupt company's customer relationships and revenue.
> According to the indictment, the defendants used forged sham contracts to make it seem that iLearning's customers were real, and used "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -- to manufacture revenue.
> At least 90% of iLearning's $421 million of reported revenue in 2023 was fabricated, the indictment said.
> The company went public in April 2024, and its market value on the Nasdaq peaked at $1.5 billion before a prominent short-seller questioned its reported revenue.
For the record the short sellers who blew up the fraud were Hindenburg Research. This is the second AI company they've discovered that is a scam, the other being Super Micro with their chip-selling scam: https://www.forbes.com/sites/tylerroush/2026/03/20/super-mic...
> used "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -- to manufacture revenue.
They should’ve instead “bought stake” in the customer companies and then asked them to use that money to buy their “product” like the normal trillion dollar companies do.
> "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -
I thought a lot of public, high profile, AI adjacent sales were seller financed or financed by the seller investing in the purchaser. Is that the same thing?
A lot of these people do go to prison but know one pays attention long enough to notice.
This same scam was common during the dotcom boom in the 1990s. A lot of people went to prison but every generation needs to learn this lesson the hard way apparently.
iLearningEngines .. hindenburg did some research ILearningEngines: An AI SPAC with Artificial Partners and Artificial Revenue (2 years ago) https://news.ycombinator.com/item?id=41390619
Hindenburg Research is great. They also did the Nikola expose (that bunch of shysters who claimed to have electric truck technology where their truck couldn't even move under its own power so they filmed it rolling down a gentle slope).
For anyone wanting to get into the weeds about detecting accounting fraud, the book "Financial Shenanigans" has lots of historical examples of ways company executives have cooked the books to make their public company financial statements appear more appealing to investors than they actually are.
It's a real problem at this point. People still say "nobody went to jail for the GFC" even though over 200 people did in the US; it's just it took a decade and nobody actually paid attention a decade later when they went to jail.
If they arrest everyone who does a wash transaction to generate the appearance of revenue there aren't going to be many founders left standing in 2026.
It appears what really ended their little scam was the $421 million of reported revenue based on complete lies.
Because lying to investors about product hasn't been really an issue lately, even Intel ~5 years ago did some presentations that were a complete fantasy back when they were desperate to keep their stock value but could not produce a chip smaller than 14nm.
If they prosecute CEOs based on lies to investors other than accounting, almost all AI startups would go down.
> they defrauded investors and lenders by fabricating "virtually all" of the now-bankrupt company's customer relationships and revenue.
> According to the indictment, the defendants used forged sham contracts to make it seem that iLearning's customers were real, and used "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -- to manufacture revenue.
> At least 90% of iLearning's $421 million of reported revenue in 2023 was fabricated, the indictment said.
> The company went public in April 2024, and its market value on the Nasdaq peaked at $1.5 billion before a prominent short-seller questioned its reported revenue.
For the record the short sellers who blew up the fraud were Hindenburg Research. This is the second AI company they've discovered that is a scam, the other being Super Micro with their chip-selling scam: https://www.forbes.com/sites/tylerroush/2026/03/20/super-mic...
> used "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -- to manufacture revenue.
They should’ve instead “bought stake” in the customer companies and then asked them to use that money to buy their “product” like the normal trillion dollar companies do.
> "round trip" transfers of investor and lender funds -- meaning they sent money to purported customers, who then returned it to iLearning -
I thought a lot of public, high profile, AI adjacent sales were seller financed or financed by the seller investing in the purchaser. Is that the same thing?
I think the issue here isn't that they did seller financing but rather there was not an actual buyer at all.
Supermicro isn't an "AI company", it's a Taiwanese origin x86 server/industrial/embedded hardware manufacturer with roots that go back 30 years.
Unfortunately, in 2026 even shoe companies are "AI companies"
Half a decade ago they were all blockchain companies. Before that I don’t remember, what was the buzzword, big data?
We will never learn our lesson. Humanity just keeps repeating the same mistakes. Remember Long Island Ice Tea / Blockchain?
A sucker is born everyday
One a day? I think we're up to over 4 a second.
https://worldstats.io/clock
Unfortunately there is a real chance they get pardoned or just their cars dropped for a small sum of 1-5 million dinner.
The unscrupulous in the white house will take your money (for a pardon) no matter what the crime.
Play with fire, and you get burned...
These scams are all too frequent today, and putting these guys and others like them in prison would act as a deterrent.
We'll see if our system can actually hold any white collar criminals accountable though...
A lot of these people do go to prison but know one pays attention long enough to notice.
This same scam was common during the dotcom boom in the 1990s. A lot of people went to prison but every generation needs to learn this lesson the hard way apparently.
They couldn't buy pardons in the 90's like they can in 2026. Nobody is going to prison.
iLearningEngines .. hindenburg did some research ILearningEngines: An AI SPAC with Artificial Partners and Artificial Revenue (2 years ago) https://news.ycombinator.com/item?id=41390619
Hindenburg Research is great. They also did the Nikola expose (that bunch of shysters who claimed to have electric truck technology where their truck couldn't even move under its own power so they filmed it rolling down a gentle slope).
For anyone wanting to get into the weeds about detecting accounting fraud, the book "Financial Shenanigans" has lots of historical examples of ways company executives have cooked the books to make their public company financial statements appear more appealing to investors than they actually are.
Federal investigations always take forever.
It's a real problem at this point. People still say "nobody went to jail for the GFC" even though over 200 people did in the US; it's just it took a decade and nobody actually paid attention a decade later when they went to jail.
If they arrest everyone who does a wash transaction to generate the appearance of revenue there aren't going to be many founders left standing in 2026.
amd that’s probably good
Using the right channels, they can buy a pardon. Let's see how it unfolds.
No, that seems unlikely. They committed the cardinal sin of stealing from the rich.
Also probably why SBF is yet to be pardoned
He was a big supporter of the Democratic Party which would not necessarily lead to a pardon with the Republican administration.
It appears what really ended their little scam was the $421 million of reported revenue based on complete lies.
Because lying to investors about product hasn't been really an issue lately, even Intel ~5 years ago did some presentations that were a complete fantasy back when they were desperate to keep their stock value but could not produce a chip smaller than 14nm.
If they prosecute CEOs based on lies to investors other than accounting, almost all AI startups would go down.
Why’s it almost always south asians scamming lately?
First it was hipsters, then weirdo geek freaks.
> Why’s it almost always south asians
It isn't. It's very rarely south asians.