A new complaint was filed against iLearningEngines Holdings (AILE) by shareholder (plaintiff) Danny Walker on October 7, 2024, in the U.S. District Court for the District of Maryland. The defendants in the complaint are the company, Director, CEO and majority holder Harish Chidambaran, and CFO and Treasurer Sayyed Farhan Naqvi.
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The plaintiff alleges that he bought AILE stock at artificially inflated prices between April 22, 2024 and August 28, 2024 (the “Class Period”) and is now seeking compensation for his financial losses. To learn more about the lawsuit click here.
iLearningEngines operates an AI (artificial intelligence) platform for learning, work automation, and information intelligence.
The filed complaint alleges that during the Class Period, the defendants misled AILE investors in violation of Sections 10(b) and 20(a) of the Securities Exchange Act.
Plaintiff’s Allegations
According to the complaint, iLearningEngines intentionally misrepresented information presented in its financial statements. In particular, the defendants willfully inflated the accounts receivables and payables related to a “Technology Partner” without giving any further details about the party or the transactions.
For instance, in the Q4 FY23 results published on April 22, 2024, the accounts receivable and payable to the particular Technology Partner were the main drivers of changes in the company’s financial position. Furthermore, the defendants continued to report similar transactions to the related party throughout most of 2024, in all quarterly filings submitted to the SEC.
Additionally, the defendants certified the accounts in their respective capacities, claiming that they were free from fraud and misrepresentation. As a result, the defendants allegedly failed to exercise proper oversight and control over the reported financial numbers.
iLearningEngines’ Misrepresentations
In contrast to the claims made by iLearningEngines and its executives, a report by short seller Hindenburg Research, filed on August 29, 2024, revealed the company’s alleged misdemeanors. In a report titled “iLearningEngines: An Artificial Intelligence SPAC with Artificial Partners and Artificial Revenue,” the short seller accused the company of filing fraudulent financial statements. Following the news, AILE shares collapsed 53.3%.
In particular, the report alleged that nearly 99% of the company’s revenues were from a related, undisclosed entity, called “Technology Partner.” Additionally, the report stated that these revenues were fake and were siphoned through this related entity. Hindenburg also showed that the related party was an Indian company called Experion, which shared the same CEO, Directors, and Board as iLearningEngines. However, the CEO has consistently denied any wrongdoing on behalf of the company and on his own accord.
To conclude, the defendants allegedly overstated the financial metrics of the company, inducing shareholders to buy the stock. Year-to-date, AILE stock has plunged 89.5%, causing massive damage to shareholder returns.
