AI company sues ex-employee for alleged theft of cutting-edge ChatGPT-rivaling technology
In a shocking turn of events, Elon Musk's artificial intelligence company, xAI, has filed a federal lawsuit against its former engineer, Xuechen Li. The lawsuit, filed on August 28, 2025, in the Northern District of California, claims that Li stole proprietary data related to xAI's conversational AI system, Grok, before joining OpenAI on August 19, 2025.
Grok, described as one of the most advanced and powerful generative AI systems in the world, was launched in November 2023. The stolen information is believed to have been uploaded to Li's personal systems on July 25, 2025, just three days before his resignation.
Li, who joined xAI in February 2024, had signed comprehensive confidentiality agreements upon joining the company, including an Employee Confidential Information and Invention Assignment Agreement. However, the lawsuit alleges that Li falsely represented compliance with these confidentiality obligations in a Termination Certificate on August 1, 2025.
The lawsuit seeks temporary restraining orders requiring Li to surrender his personal devices for forensic examination and preventing his employment at OpenAI until all confidential information is deleted. It also demands compensatory and punitive damages for xAI.
Prior to the alleged theft, Li had sold $4.7 million in xAI stock through a company-facilitated transaction in June 2025. He sold an additional $2.2 million on July 23, 2025, and another $2.2 million on July 25, 2025, the day he is believed to have uploaded the stolen data.
OpenAI, which controls over 80 percent of the generative AI chatbot market after the launch of ChatGPT in November 2022, has not yet commented on the matter. As of August 29, 2025, there is no available information about which company Li has been employed by after leaving xAI on August 28, 2025.
The market value of AI technology is predicted to exceed hundreds of billions of dollars this year and over a trillion dollars by the decade's end. The case highlights the growing importance of protecting intellectual property in the AI industry.
This is a developing story and will be updated as more information becomes available.
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