iLearningEngines: SPAC Fallout and Chapter 7 Conversion

iLearningEngines, Inc. was a Bethesda, Maryland-based AI-powered learning automation and information intelligence company that went public through a SPAC merger with Arrowroot Acquisition Corp in April 2024 at an implied enterprise value of roughly $1.4 billion. The company entered Chapter 11 on December 20, 2024 in the U.S. Bankruptcy Court for the District of Delaware after a rapid sequence of shocks that included a Hindenburg Research short report, auditor withdrawals and SEC scrutiny, and a Nasdaq delisting notice. The company said it wanted to continue operating in the ordinary course while it pursued restructuring options.

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.

Debtors	iLearningEngines, Inc.; iLearningEngines Holdings, Inc.; iLearningEngines FZ-LLC; In2vate, L.L.C.
Court	U.S. Bankruptcy Court for the District of Delaware
Case number	24-12826 (LSS)
Judge	Laurie Selber Silverstein
Petition date	December 20, 2024 (initial debtors)
Conversion to chapter 7	March 6, 2025
Headquarters	Bethesda, Maryland
Employees at filing	Approximately 18 full-time employees 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

Restructuring

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 collapsed 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.

Company Background

iLearningEngines was founded in 2010 by Harish Chidambaran and positioned itself as an AI-powered learning automation and information intelligence platform. The company is 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 and followed a 2023 announcement that highlighted the company's global footprint and rapid growth narrative.

What Drove the Chapter 11 Filing

A sharp credibility and liquidity crisis unfolded in late 2024. 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 report triggered a steep stock decline and intensified scrutiny of the company's disclosures.

In November 2024, iLearningEngines announced that its CFO had been placed on administrative leave, its auditor withdrew prior audit opinions, and the company received an SEC subpoena for documents and information. A securities class action followed in early December 2024. Around the same time, the company disclosed a cyberattack that resulted in a $250,000 wire payment being misdirected and unrecovered.

Nasdaq issued a delisting notice on December 23, 2024 and trading was suspended on January 2, 2025. The debtors entered Chapter 11 shortly afterward while they attempted to stabilize operations and preserve the value of their technology and customer relationships.

Capital Structure 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 Dates and Timeline

Frequently Asked Questions

1. 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.

2. When did iLearningEngines file for bankruptcy? The initial debtors filed Chapter 11 petitions on December 20, 2024 in the District of Delaware.

3. 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.

4. What was the SPAC transaction? The company went public through a business combination with Arrowroot Acquisition Corp that closed on April 16, 2024, with Nasdaq trading beginning the next day.

5. What did the Hindenburg report allege? 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.

6. 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.

7. Did Nasdaq delist the stock? Nasdaq issued a delisting notice on December 23, 2024 and trading was suspended on January 2, 2025.

8. 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.

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