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> The line between marketing and misleading isn't always so clear.

In the general I kind of disagree with this. I am not a lawyer, so I don't know all the details, but if you look for it, you should be able to find the line since it's generally illegal to mislead customers. There's also a whole set of contractural and perhaps even legal obligations when it comes to investors.

For contracts and the law to be enforceable, they need draw lines as clearly as possible. There's always some amount of details that are up to interpretation, but companies make sure to pay legal counsel to make sure they don't cross these lines.

Now, specifically in this case, I do agree with you. This case doesn't seem to be a legal matter of customer or investor misleadings (thus far). Viola Credit did seize $37 million, so IMO there clearly was a violation of contract in all this, but it seems like that had nothing to do with the whole AI overselling.

Arguably, Theranos was also somewhere in a gray area between marketing and fraud.

Everyone in the industry incentivizes and participates in this behavior, but once in a while, let's grab a few stand-out individuals to scapegoat once in a while for all the harm caused by/to the entire group with this behavior. Make sure you pick someone big/ugly enough to be credibly dangerous to the whole group, but who isn't too dangerous and well connected so that you can be sure that when the card flips on them everyone around them scatters.

It's the same reason groups of individual humans do it: Scapegoating is a much lower resistance path to follow than the horrifying alternative (self-consciousness, reflection, love)

>Arguably, Theranos was also somewhere in a gray area between marketing and fraud.

Theranos was clear fraud. She claimed scientific advances that did not exist.

What about traditional auto manufacturers making claims about solid state battery technology they will achieve in the next decade that they haven't yet?

There are always unsolved engineering and scientific challenges that stand between today and future product, and nothing is guaranteed, but you have to sell investors on the future technology (see: frontier model makers pushing AGI/ASI hype)

Obviously there are differences between Toyota's SS battery claims and Theranos' claims, but it's not a black and white line, it's a spectrum.

Why are so many people here pretending fraud is ambiguous?

Saying "We will have great batteries 10 years from now" is not fraud. It's your belief about the future. Everyone knows no one can predict the future.

Saying "this hydrogen powered truck works, here is a video of it running on the road right now" but the video is edited so you don't see that it's going down hill and the car isn't actually running" that's fraud.

Theranos wasn't in trouble for saying their machines would be great one day. They got in trouble for lying about the current state of things, saying they were performing blood tests on their machines when they were not.

BuilderAI never actually told customers that development was done using AI, that's something people made up after the company went bust. If you look at their website (builder.ai), they explain that their virtual assistant "Natasha" assigns a developer, and then uses face recognition to verify the identity of the developer.

Take a minute to visit their site and get informed. We live in a time where people form opinions just by reading a headline.

I know that. They had their funding pulled for fudging their sales numbers, which is fraud. And people pretending it's not have latched onto some other people's misunderstanding.

I'll give you a more temporally synchronous example if you like, Microsoft's deliberately misleading claims about their quantum computing progress: https://www.science.org/content/article/debate-erupts-around...

Theranos was dealing with people's health. Misdiagnoses, delayed treatments, etc, that's real harm. Imo, comparing that to building web apps isn't the same.

The actual crime Theranos founder went to jail for was not misdiagnosing people. It was defrauding investors because they made them believe their machines were doing the tests when really they were sending them out to separate labs

Completely different story. With Theranos the investors sued the founders, with Builder AI they didn't. This suggests they knew what was really going on, so it wasn't fraud in their eyes.

It is not a completely different story. The lender yanked back the money they lent because they found out about fraudulent sales numbers. That led to the bankruptcy. It was still the people whose money was in the game who brought the company down in both scenarios because fraud is a big red line for anyone whose money is on the line

I understand where you're coming from, but we need to stick to the facts. If there are no court cases, we can't imply that fraud was committed. We don't know what kind of agreements were in place, why the money was being transferred, or what the expectations were on both sides.

We also don't know what was discussed in private. For example, it could have been something like: "We want to be part of this investment opportunity, we'll give you $40 million. But if regulators start asking questions, we want the money back."

Without full context or legal findings, everything else is just speculation.

I'm surprised no one is talking about Microsoft's investment in BuilderAI, a total loss. It's unlikely they'll recover much, if anything. So why aren't they suing the CEO and CFO? Maybe some of the issues were handled quietly behind the scenes to avoid public exposure or reputational damage? I don't know.

They admitted themselves to this fraud. Try reading the article you are posting under:

> Less than two months ago, Builder.ai admitted to revising down core sales numbers and engaging auditors to inspect its financials for the past two years. This came amidst concerns from former employees who suggested sales performance had been inflated during prior investor briefings.

It doesn't get more textbook fraud than lying to investors about how many sales you've recorded

Yes, round-tripping is considered fraud in business. The CEO and CFO committed fraud. That has been proven, and there is no doubt about it.

But the article also claims they misled investors about the technology they were using, and that part is false. It even mocked Indian developers for working as programmers and pretending to be machines, which is obviously absurd.

You said earlier:

> This suggests they knew what was really going on, so it wasn't fraud in their eyes.

But now when we are talking about obvious fraud everyone agrees about and which caused investors to pull money you are pivoting to a quibble about whether the marketing was lies or not. Maybe a company which lies about its sales figures can't be trusted to be truthful about its product

Theranos was using the same testing equipment and techniques as any other lab for most of their diagnostic services. Which is how they avoided being instantly exposed when their results ended up being meaningless. “In October 2015, John Carreyrou of The Wall Street Journal reported that Theranos was using traditional blood testing machines instead of the company's Edison devices to run its tests, and that the company's Edison machines might provide inaccurate results.” https://en.wikipedia.org/wiki/Theranos

They did plenty of shady shit including producing poor results, but that’s largely incompetence independent of fraud vs intentionally putting people’s lives on the line.

IMO, the fraud kind of hides the equally important story where incompetent 19 year old collage dropout shockingly doesn’t know how to effectively setup and manage complex systems.

> Overselling tech happens all the time in this space.

Overselling is fraud and is a crime at a certain point, which they clearly passed otherwise they wouldn't have had their lenders pull back money and leave them bankrupt

Just to play the devil's advocate: if a software company tells you your data is secure and then someone hacks their server and steals your photos and personal data, did their CEO and marketing department oversell their level of security? Is this fraud as well?

"Your data is secure" is known to never be 100%. But what assessments and technology they say they use for security needs to be followed. And if it's found out that those are lies, then it's fraud.

Kind of like how these guys lied about the volume of sales they had. Textbook fraud. They aren't in trouble for saying "AI is going to be great"

I agree. But using the "your data is secure" analogy, BuilderAI never actually told customers that development was done using AI, that's something people made up. If you look at their website (builder.ai) they explain that their virtual assistant "Natasha" assigns a developer (I assume from India). That part doesn’t sound like fraud to me, and it's the part everyone seems to be focusing on.

The company went into insolvency because the CEO and CFO were misleading investors by significantly inflating sales figures through questionable financial practices. According to the Financial Times, the Indian founders and accountants reportedly engaged in round-tripping with VerSe Innovation. That raised red flags for investors, regulators, and prosecutors, and led to bankruptcy proceedings.