In the First Day Declaration, the debtors said they needed immediate access to cash collateral to avoid a near-term liquidation and preserve asset value. The cases relied on cash collateral through late February 2025, but the debtors said they could not secure DIP financing and terminated all employees on February 14, 2025. The court approved conversion to chapter 7 on March 6, 2025, shifting the cases into liquidation and placing a chapter 7 trustee in control.
iLearningEngines, Inc. (4 jointly administered entities)
Court
U.S. Bankruptcy Court for the District of Delaware
Case Number
24-12826
Judge
Hon. Laurie Selber Silverstein
Petition Date
December 20, 2024
Conversion to chapter 7
March 6, 2025
Employees at Filing
Approximately 18 full-time, plus contractors
Estimated Assets
$100 million to $500 million
Estimated Liabilities
$100 million to $500 million
Prepetition Secured Debt
About $54 million revolving facility
Claims and Noticing Agent
Stretto
Case Snapshot
From Cash Collateral to chapter 7 Conversion
iLearningEngines characterized the chapter 11 filing as an emergency step to preserve value while it negotiated with secured lenders. The debtors filed a Cash Collateral Motion requesting authority to use cash collateral under a revolving credit facility led by East West Bank, with adequate protection that included replacement liens and a 507(b) superpriority claim. The court entered an Interim Cash Collateral Order authorizing use through January 25, 2025, and a later amendment order extended the termination date to February 21, 2025.
The debtors also pursued a dispute with Experion Technologies, a reseller and collections counterparty. In a motion to enforce the automatic stay and compel turnover, the debtors alleged that Experion interfered with customer payments and withheld collections after the bankruptcy filing. The motion alleged that customer payments fell from tens of millions of dollars in September and October 2024 to zero by December 2024, and that Experion demanded $3 million postpetition to restart collections.
After cash collateral negotiations reached an impasse and the debtors terminated all employees on February 14, 2025, the debtors filed a Motion to Convert the cases to chapter 7. The court entered a Conversion Order on March 6, 2025, converting the chapter 11 cases to chapter 7 liquidations and preserving the carve-out for administrative expenses.
SPAC Merger and Nasdaq Listing
iLearningEngines was founded in 2010 by Harish Chidambaran and positioned itself as an AI-powered learning automation and information intelligence platform. The company was headquartered in Bethesda, Maryland and had operations in the United States, the Dubai Free Zone (UAE), Australia, and India.
The company went public via a SPAC merger with Arrowroot Acquisition Corp that closed on April 16, 2024, with trading commencing the next day on Nasdaq under the AILE ticker. The transaction valued the combined company at roughly $1.4 billion.
Hindenburg Report and SEC Subpoena
A Hindenburg Research report titled "An Artificial Intelligence SPAC With Artificial Partners and Artificial Revenue" alleged that the company's revenue and expense figures were largely fabricated and that a related-party technology partner was central to the reported results. The stock fell after the report's publication.
Nasdaq issued a delisting notice on December 23, 2024, three days after the chapter 11 filing, and trading was suspended on January 2, 2025.
East West Bank Revolver and Liquidity
The Cash Collateral Motion describes a revolving credit facility governed by an April 17, 2024 agreement with East West Bank as administrative and collateral agent. The facility originally provided up to $40 million in revolving loans plus an uncommitted accordion and was later amended to increase the maximum to $60 million and add Valley National Bank as a lender. At the petition date, the debtors reported roughly $54 million in funded debt under the revolver.
The chapter 11 cases depended on cash collateral to fund operating expenses, professional fees, and the cost of preserving intellectual property and customer relationships. The debtors said they did not secure postpetition financing and were out of liquidity once the cash collateral extension expired in late February 2025.
Key Timeline
Date
Event
April 16, 2024
SPAC merger with Arrowroot Acquisition Corp closes; the company begins trading on Nasdaq.
August 29, 2024
Hindenburg Research publishes its short report.
November 18, 2024
CFO placed on leave, auditor withdraws prior opinions, and the company discloses an SEC subpoena.
December 20, 2024
Chapter 11 petitions filed in Delaware.
December 23, 2024
Nasdaq issues a delisting notice; trading is suspended January 2, 2025.
January 9, 2025
First day motions and cash collateral request filed.
February 26, 2025
Motion to convert to chapter 7 filed.
March 6, 2025
Court approves conversion to chapter 7.
Frequently Asked Questions
What was iLearningEngines?
iLearningEngines was a Bethesda, Maryland-based company that provided AI-powered learning automation and information intelligence software and services, with operations across the United States, the UAE, Australia, and India.
Why did the case convert to chapter 7?
The debtors said they could not secure DIP financing, cash collateral use expired on February 21, 2025, and they had terminated all employees on February 14, 2025, leaving no viable path to reorganization.
The short seller alleged that revenue and expense figures were largely fabricated and that a related-party technology partner was central to reported results in its August 29, 2024 report.
What happened with the auditor and the SEC?
In November 2024, the company placed its CFO on administrative leave, its auditor withdrew prior audit opinions, and the company disclosed that it received an SEC subpoena.
Who is the claims and noticing agent in the bankruptcy cases?
Stretto served as the court-approved claims and noticing agent in the chapter 11 cases.
For more restructuring coverage, visit the ElevenFlo blog.
Sources
First Day Declaration /documents/cc0d3978-231e-488e-9897-3a2bc501a854/
Interim Cash Collateral Order /documents/b2a95dad-8d96-480f-8e46-f9fee523c621/
amendment order /documents/79ab11d8-ccf9-4742-8ddb-6e5c595af9d7/
motion to enforce the automatic stay /documents/75c1195d-ff9a-4b4a-8788-84d06d36db5c/
Motion to Convert /documents/dc4ea008-2550-4728-ba97-b18f88a0ee47/
Conversion Order /documents/60b8d992-94f9-4d67-8347-ce5cc39323b9/
SPAC merger with Arrowroot Acquisition Corp https://www.globenewswire.com/news-release/2024/04/16/2864097/0/en/iLearningEngines-Inc-Becomes-Publicly-Traded-Company-After-Completing-Business-Combination-With-Arrowroot-Acquisition-Corp-Will-Commence-Trading-on-Nasdaq-Under-Ticker-Symbol-AILE.html
Hindenburg Research short report https://www.benzinga.com/pressreleases/24/08/g40641939/ilearningengines-aile-tanks-after-hindenburg-contends-revenues-and-expenses-l-argely-fake-hagens-b
auditor withdrawals and SEC scrutiny https://www.globenewswire.com/news-release/2024/11/18/2983189/0/en/iLearningEngines-AILE-Crashes-After-Company-Places-CFO-on-Leave-Auditor-Withdraws-Opinions-SEC-Subpoenas-Company-Hagens-Berman.html
continue operating in the ordinary course https://www.globenewswire.com/news-release/2024/12/23/3001205/0/en/iLearningEngines-Voluntarily-Initiates-Chapter-11-Proceedings.html
AI-powered learning automation and information intelligence platform https://www.businesswire.com/news/home/20230427005966/en/iLearningEngines-a-leader-in-AI-Powered-Learning-Automation-to-List-on-NASDAQ-via-Merger-with-Arrowroot-Acquisition-Corp.
securities class action https://www.globenewswire.com/news-release/2024/12/04/2991847/0/en/iLearningEngines-AILE-Faces-SEC-Scrutiny-and-Investor-Backlash-Over-Accounting-Irregularities-Hagens-Berman.html
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. See the disclaimer.