Elon Musk withdraws lawsuit against OpenAI, faces insider trading allegations

June 12, 2024

  • Elon Musk submitted a lawsuit against OpenAI criticizing profit motives
  • He's now withdrawn that, and hasn't yet given an official explanation
  • Musk recently criticized OpenAI and Apple's new partnership
OpenAI X

Elon Musk has dismissed his breach of contract lawsuit against OpenAI and CEO Sam Altman. 

The lawsuit, filed in February 2023, accused OpenAI of abandoning its founding mission to develop AI for the benefit of humanity rather than for profit. 

It claimed that “OpenAI, Inc. has been transformed into a closed-source de facto subsidiary of the largest technology company in the world: Microsoft. Under its new board, it is not just developing but is actually refining an AGI to maximize profits for Microsoft, rather than for the benefit of humanity.”

Musk’s attorneys didn’t provide a reason for dropping the case, which was set to be heard by a San Francisco Superior Court judge on Wednesday.

The legal battle between Musk and the company he co-founded in 2015 has been ongoing for months. Musk claimed that OpenAI had deviated from its altruistic goals and drifted far away from its founding principles

It’s doubtful that the lawsuit ever had legs. Musk’s feud with OpenAI and  Altman has heated up over the years, and the lawsuit, while probably fair in its sentiment, looked more like a novelty than a genuine legal challenge. 

OpenAI countered that Musk had previously supported the idea of a for-profit structure and even suggested a merger with Tesla. 

“We’re sad that it’s come to this with someone whom we’ve deeply admired – someone who inspired us to aim higher, then told us we would fail, started a competitor, and then sued us when we started making meaningful progress towards OpenAI‘s mission without him,” OpenAI wrote in a blog post after the lawsuit.

The increasingly public feud between Musk and other Big Tech generative AI protagonists intensified earlier this week when Apple announced a partnership to enhance its Siri voice assistant and operating systems with ChatGPT.

Commenting on the AppleOpenAI partnership, Musk blasted both OpenAI and Apple on X, stating, “Apple has no clue what’s actually going on once they hand your data over to OpenAI. They’re selling you down the river.” 

Despite Musk’s concerns about Apple teaming up with OpenAI, investors reacted favorably, as Apple’s stock market value surged above $3 trillion, reaching a record high.

Why Musk withdrew his OpenAI lawsuit

This might have proved one lawsuit too many for Musk to handle.

Earlier in the week, it was revealed that Musk is facing a different lawsuit brought by the Employees’ Retirement System of Rhode Island (ERSRI), an institutional investor in Tesla.

The lawsuit claims that Musk and his brother Kimbal, a Tesla director, improperly sold a combined $30 billion in shares between late 2021 and the end of 2022, allegedly cashing in ahead of developments that would have caused the stock to fall in value.

The ERSRI lawsuit further alleges that Musk sold the shares at inflated prices by disguising his plan to use the proceeds to buy Twitter.

It also claims that Musk sold Tesla stock when he knew delivery schedules had fallen behind. It also raises concerns about poor governance, such as diverting Tesla employees to work at X and forcing Tesla to start paying for advertising on X.

And wait, there’s more. Tesla shareholder Michael Perry filed another legal action last month, claiming Musk engaged in insider trading. 

There are only so many lawsuits one tech boss can handle, even someone as thick-skinned to public critique as Musk.

However, even with this lawsuit aside, OpenAI‘s leadership remains under pressure. After last year’s leadership tussle, Altman hasn’t quite left the generative AI industry spotlight, attracting more critique of his own. 

Altman was recently condemned by OpenAI insiders, and shortly after leading AI researchers left the company, a controversial clause in employee contracts forbidding them from speaking ill of the company was scrapped. This cast an ever-lengthening shadow over Altman’s leadership style. 

Employees from OpenAI and Google later banded together to put forward their ‘right to warn’ if they encounter AI-related risks in their companies. 

The OpenAI lawsuit has been dismissed, but the sentiment remains. Musk and his lawyers will, meanwhile, stay busy with other, potentially more serious matters.

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Sam Jeans

Sam is a science and technology writer who has worked in various AI startups. When he’s not writing, he can be found reading medical journals or digging through boxes of vinyl records.


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