NEW YORK – In a stunning development, Sayyed Farhan Ali “Farhan” Naqvi, the former Chief Financial Officer of iLearningEngines, Inc., has been charged in a multi-year, elaborate scheme to defraud investors and lenders through a web of fabricated financial statements and nonexistent customer data. Naqvi was arrested on April 17, 2026, in San Jose, California, marking a critical turning point in an investigation that has gripped the financial world.
The Charges Against Sayyed Farhan Ali “Farhan” Naqvi
The ten-count indictment unsealed in federal court in Brooklyn, New York, on April 17, 2026, details a sophisticated financial crimes enterprise allegedly orchestrated by Naqvi alongside former CEO Puthugramam Chidambaran. Naqvi faces grave charges, including conspiracy to commit securities fraud, securities fraud, conspiracy to commit wire fraud, and wire fraud. The most severe among these is running a continuing financial crimes enterprise, a charge that carries a mandatory minimum sentence of 10 years and a maximum of life imprisonment if convicted.
The core of the alleged fraud involved creating “virtually all” of iLearningEngines’ customer relationships and revenues. From at least January 2019 to April 2025, Naqvi and Chidambaran are accused of inflating the company’s revenues by hundreds of millions of dollars annually. This was achieved through sham contracts with purported customers, often signed by iLearningEngines employees or their family members masquerading as senior executives. They went so far as to build a website for a shell entity to bolster the illusion of legitimate customers. A particularly egregious tactic involved “round trip” transfers, where investor and lender funds were allegedly routed to these fake customers only to be returned to iLearningEngines, artificially manufacturing revenue.
Scale of the Crime: Billions in Valuation, Millions in Personal Gain
The alleged scheme’s scale is staggering. In 2023, iLearningEngines reported $421 million in revenue, with at least 90% of this amount now believed to be fabricated. The aggregate value of the “round-trip” transactions alone exceeded $144 million. The fraud propelled iLearningEngines to a peak valuation of $1.5 billion after its April 2024 merger with Arrowroot Acquisition Corp. However, this artificial edifice crumbled following a short-seller report, leading to a 54% stock plummet and a market value drop to around $500 million.
Sayyed Farhan Ali “Farhan” Naqvi personally benefited significantly from the alleged fraud, receiving approximately $11.2 million in iLearningEngines common stock and nearly $4.5 million in cash to cover tax liabilities. His alleged co-conspirator, Chidambaran, received over $500 million in common stock and $12.5 million in restricted stock units. The victims are numerous, encompassing retail and institutional investors who suffered substantial losses, as well as lenders who provided financing based on the company’s fraudulent financial representations.
Who Is Sayyed Farhan Ali “Farhan” Naqvi?
Sayyed Farhan Ali “Farhan” Naqvi, 44, of Indian origin and residing in Houston, served as the Chief Financial Officer of iLearningEngines, Inc. The Bethesda, Maryland-based technology company, founded in 2010 by Puthugramam “Harish” Chidambaran, marketed itself as an AI platform for learning and work automation. The company had a public debut in April 2024 following its merger with Arrowroot Acquisition Corp., a moment that marked the peak of its fabricated success.
Investigation Details: Unraveling a Complex Web
The extensive investigation was spearheaded by the Federal Bureau of Investigation (FBI) and the U.S. Attorney’s Office for the Eastern District of New York, with the Securities and Exchange Commission (SEC) also launching an inquiry. The intricate fraud began to unravel in August 2024, not by internal whistleblowers, but through the diligent work of Hindenburg Research, a prominent short-seller firm. Their report, titled “iLearningEngines: An Artificial Intelligence SPAC With Artificial Partners And Artificial Revenue,” critically alleged that nearly all of the company’s revenue and expenses in 2022 and 2023 were channeled through an undisclosed related party, concluding that the majority of iLearningEngines’ revenue was “largely fake.”
This exposé triggered a cascade of events: a board member’s resignation and the initiation of class-action lawsuits in September 2024, followed by a cybersecurity incident in November that saw $250,000 stolen. By December 2024, iLearningEngines filed for Chapter 11 bankruptcy protection, converting to Chapter 7 liquidation by March 2025, signaling its complete collapse.
“The alleged fabrication of customer relationships and ’round-trip’ transactions on such a vast scale highlights the audacious nature of this financial crimes enterprise, leaving a trail of deceived investors and a defunct company in its wake.”
What Happens Next for Sayyed Farhan Ali “Farhan” Naqvi
Sayyed Farhan Ali “Farhan” Naqvi was scheduled to appear in federal court in the Northern District of California on April 17, 2026, while Chidambaran appeared in the District of Maryland. Both are expected to face proceedings in federal court in the Eastern District of New York at a later date. As these are currently allegations, Naqvi is presumed innocent until proven guilty. The legal process is just beginning, and the full extent of the evidence will be presented in court. The potential sentence for the continuing financial crimes enterprise charge alone underscores the gravity of the accusations.
Protecting Yourself: Recognizing Red Flags in Corporate Finance
This case serves as a stark reminder for investors and lenders to be vigilant. Several red flags were present in the iLearningEngines saga. A lack of transparency regarding key “Technology Partners” or significant revenue sources, especially when coupled with high growth claims but no obvious industry presence, should raise immediate concerns. Discrepancies in reported revenue, as highlighted by the Hindenburg report’s comparison of Indian market figures, are critical warning signs. Furthermore, a prospective institutional investor’s inability to find “no trace” of a purported major customer, despite Naqvi allegedly touting them as one of the company’s biggest, is a glaring alarm. Even the auditor’s own regulatory issues, as Marcum LLP faced fines and charges for audit quality deficiencies, should have prompted deeper scrutiny. Investors should always conduct thorough due diligence, question opaque financial reporting, and heed independent research, especially from short-seller reports, which often uncover critical issues. Stay informed about related fraud investigations to better understand potential risks.
