Elon Musk files for injunction to halt OpenAI’s transition to a for-profit

In the motion for an injunction, Musk’s attorneys allege OpenAI is depriving xAI of capital by extracting promises from investors not to fund it and the competition. In October, the Financial Times reported that OpenAI demanded investors in its latest funding round abstain from also funding any of OpenAI’s rivals, including xAI.

“Musk has verified that at least one major investor in OpenAI’s October funding round has subsequently declined to invest in xAI,” counsel for Musk wrote.

Of course, xAI has had no trouble raising money lately. Reportedly, the startup closed a $5 billion round this month with participation from prominent investors including Andreessen Horowitz and Fidelity. With around $11 billion in the bank, xAI is one of the best-funded AI ventures in the world.

Musk’s motion for an injunction also alleges that Microsoft and OpenAI continue to illegally share proprietary information and resources, and that several of the defendants, including Altman, are engaging in self-dealing that harms marketplace competition. For example, the filing notes, OpenAI selected Stripe, a payment platform in which Altman has “material financial interests,” as OpenAI’s payment processor. (Altman is said to have made billions from his Stripe holdings.)

Microsoft, which first backed OpenAI in early 2019, has ramped up the partnership over the last several years, investing a total of ~$13 billion in exchange for what’s effectively a 49% stake in the company’s earnings. Microsoft has also allowed OpenAI to make extensive use of its cloud hardware resources, enabling the startup to train, fine-tune, and run AI models like those that power ChatGPT.

Hoffman’s position on the boards of both Microsoft and OpenAI while also a partner at investment firm Greylock gave Hoffman a privileged view into the companies’ dealings, Musk’s attorneys argue. (Hoffman stepped down from OpenAI’s board in 2023.) As for Templeton, whom Microsoft briefly appointed as a nonvoting board observer at OpenAI, Musk’s counsel argues that she was in a position to facilitate agreements between Microsoft and OpenAI that would violate antitrust rules.

“Maintaining OpenAI’s charitable status pending final resolution and halting further self-dealing transactions by Altman protect both the organization’s founding mission and the public interest in proper administration of charities,” Musk’s attorneys wrote.

Counsel for Musk wrote that if an injunction isn’t granted, OpenAI might “lack sufficient funds” to pay damages were the court to eventually rule in Musk’s favor. (OpenAI is reportedly spending more than $5 billion and isn’t close to breaking even.) Moreover, they say, were a judge to disallow OpenAI’s nonprofit transition, it’d be “virtually impossible” to “unwind” the company’s transactions without “widespread investor loss” should OpenAI continue to accept new investments.

“No objective observer can look at OpenAI today and say it bears any resemblance whatsoever to what it promised to be,” attorneys for Musk wrote. “Plaintiffs respectfully request that the court maintain the status quo and pause defendants’ worsening behavior until final disposition.”

In a statement, an OpenAI spokesperson said, “Elon’s fourth attempt, which again recycles the same baseless complaints, continues to be utterly without merit.” The company had previously sought to dismiss Musk’s suit, calling it “blusterous” and baseless.

The post has been updated with a statement from OpenAI.