Builder.ai ex-CFO subpoenaed for auditor communications

U.S. investigators are advancing a criminal probe into Builder.ai, demanding a former executive's communications with the firm's U.K. auditor and with others involved in the financial reporting for the artificial intelligence startup ahead of its June bankruptcy.

Federal Bureau of Investigation officers served former Builder.ai Chief Financial Officer Andres Elizondo at a Dallas area airport in August with a subpoena, said people familiar with the matter, asking not to be identified because the information isn't public. Prosecutors sought information related to alleged violations of laws relating to wire fraud, securities fraud and conspiracy, according to the subpoena reviewed by Bloomberg, without naming the exact target of the probe. The U.S. Attorney's Office in Manhattan has been looking into Builder.ai's financial practices and previously demanded the company turn over documents, Bloomberg News reported in May. 

Investigators ordered Elizondo to turn over communications with investors, creditors and other accounting firms that did business with the company, according to the subpoena. They specifically asked for his exchanges with Builder.ai founder Sachin Dev Duggal and Paul Goldwin, a partner at accounting firm PKF Littlejohn who had signed off on a Builder.ai affiliate's U.K. accounts.

The specific demands from the U.S. Attorney's Office for the Southern District of New York, which haven't been previously reported, signal the investigation of the startup once valued at $1.5 billion is moving forward. Builder.ai collapsed after investors learned it had vastly inflated sales, leading to the biggest bankruptcy of an AI company since the start of the ChatGPT era. Its implosion has served as a cautionary tale for investors pouring vast sums into the technology.

The prosecutors asked for all communications and documents related to "Builder.ai/Engineer.ai" and defined that entity as all corporate affiliates and subsidiaries, including Engineer.ai Global Limited, which is the U.K. entity that Goldwin audited. Builder.ai was founded under the name Engineer.ai, and the original name is still used with some corporate affiliates.

In a statement, PKF Littlejohn said it and Goldwin did not provide any services to Builder.ai, which it described as "the US entity within the group that is under scrutiny."

"We acted solely as auditors of Engineer.ai Global Limited, the U.K. entity," a spokesman for the firm said in a statement. "We have not received a subpoena and have no visibility regarding its contents. We will review any requests for information in line with our professional obligations."

An attorney for PKF Littlejohn added that their understanding is that the firm and Goldwin are not under investigation themselves. Elizondo, who received the subpoena, is not a suspect or target of the investigation either, a person familiar with his situation said, asking not to be identified discussing private matters.

Prosecutors also broadly requested communications with "current, former, or potential accounting firms," the subpoena reviewed by Bloomberg shows. While it identifies 10 accounting firms by name, Builder.ai founder Duggal and PKF Littlejohn's Goldwin are the only two individuals specifically named. Communications with them are the first two requests made in the subpoena issued to Elizondo. 

Prosecutors haven't said that they're charging anyone in connection with the London-based company's collapse, and it's unclear whether anyone will be.

Elizondo's lawyer, Adam Katz, declined to comment on the subpoena. A spokesperson for Duggal didn't provide comment, and a spokesperson for Builder.ai didn't respond to a request for comment. The FBI and the Manhattan U.S. Attorney's Office also didn't provide comment. 

Builder.ai pitched software that would utilize AI to help users create apps with minimal coding experience. A flood of venture capital money and backing from Microsoft Corp. propelled the company to a $1.5 billion valuation in 2023, making it one of the U.K.'s biggest AI startups. Duggal became a fixture of the technology conference circuit. 

But behind the scenes, the company was using a web of complex transactions to exaggerate revenue, Bloomberg reported previously, citing documents. Builder.ai's audit committee found it had inflated 2024 sales by nearly 300%, leading creditors to seize most of its available funds and force it into bankruptcy. 

In recent months, U.S. investigators gained extensive access to the company's digital records, the people familiar with the situation said. Additional information demands were sent to some of Builder.ai's investors, including the Qatar Investment Authority, one of the people said. 

A spokesperson for QIA declined to comment. 

Goldwin has a lengthy history with Duggal. Before founding Engineer.ai in 2016, Duggal was the chief executive officer of SMX Corp., a U.K. firm that resold computer hardware and software. Goldwin became a director at SMX in 2010 and signed off on its financial statements in that capacity for several years, according to U.K. corporate filings. 

He moved to PKF Littlejohn, a London accounting firm, in 2013 and remained an SMX director for another four years. 

"Mr. Goldwin became a U.K. director only in order to oversee that the accounts were filed on time," PKF Littlejohn said of his time at SMX in the statement. "Mr. Goldwin did not know Mr. Duggal in a personal capacity." The firm said Goldwin resigned as an SMX director in January 2017 and that "no auditing services were ever provided."

Goldwin signed off on Builder.ai's U.K. accounts as its senior statutory auditor for annual accounts from 2020 to 2023. Its last full-year accounts were filed Aug. 15, 2024, for the year ending March 31, 2023. 

While small companies often turn to familiar auditors, relying on one that sat on the same board as the CEO could be a red flag to prosecutors, according to Simon Osborne, an executive fellow at the London Business School who focuses on corporate governance. "It doesn't look good," he said. "It's always a question of facts and degree."

There was no trading relationship between SMX and Engineer.ai, according to PKF Littlejohn. "Mr. Goldwin made no management decisions in relation to SMX," it said in the statement.

The Financial Times earlier reported that Elizondo received a subpoena and, in March, reported on connections between Duggal and Goldwin and other auditors. 

The U.S. Attorney's subpoena of Elizondo ordered him to appear before a grand jury on Sept. 9 in New York, according to the document reviewed by Bloomberg. But the requirement for him to appear was waived, and he is voluntarily cooperating with the investigation, the person familiar with his situation said.

Elizondo served as CFO from 2021 until 2023. The company didn't find a replacement for the position before going bankrupt.

Prosecutors and the FBI spoke with at least one other former Builder.ai staffer earlier this year, according to a person familiar with the matter, who asked not to be identified because the information isn't public.