AI software company iLearningEngines has filed for Chapter 11 bankruptcy protection in Delaware, citing mounting pressures from a recent cyberattack, allegations of revenue misreporting, and a proposed securities class action lawsuit. The Bethesda, Maryland-based company, which reported up to $500 million in debt and assets, aims to restructure its finances to stabilize operations.
Mounting Challenges Lead to Bankruptcy
In its Friday petition, iLearningEngines disclosed debts between $100 million and $500 million. The filing follows a tumultuous period marked by a cyberattack that compromised its network and resulted in the misdirection of a $250,000 wire payment, which the company was unable to recover.
Additionally, iLearningEngines said the bankruptcy filing might trigger a default on $54 million in loans owed to East West Bank and Valley National Bank.
Hindenburg Report Sparks Legal Fallout
The company faced scrutiny after an August short-seller report by Hindenburg Research accused it of inflating its revenue from India by 99%. According to the report, iLearningEngines claimed $138 million in Indian revenue for 2022, while actual revenue was allegedly closer to $850,000.
