Elon Musk’s xAI Sues OpenAI in California
Elon Musk’s artificial intelligence startup, xAI, has filed a major lawsuit against OpenAI, the maker of ChatGPT.
The lawsuit accuses OpenAI of stealing trade secrets by aggressively recruiting and targeting former xAI employees.
The Lawsuit
Filed on September 24, 2025, in the U.S. District Court for the Northern District of California, the lawsuit accuses OpenAI of running a “coordinated, unfair, and unlawful campaign” to hire away xAI staff in order to access confidential information.
According to court filings, the secrets allegedly taken include:
- The complete Grok chatbot source code
- Proprietary data center deployment strategies
- xAI’s business and contract plans
- Experimental AI research code
- Confidential recordings of Elon Musk’s internal strategy discussions
- xAI claims this information could save OpenAI billions of dollars and give them an unfair advantage in the AI race.
- Musk took to his social platform X, writing: “We sent them many warning letters, but they continued to cheat. Lawsuit was the only option after exhausting all others.”
Key Employees Named
The case focuses on three former xAI employees accused of taking secrets to OpenAI.
1. Xuechen Li – The Engineer
Li, one of xAI’s first 20 hires, is accused of downloading the company’s full codebase before leaving. Court filings say he admitted to copying files and trying to “cover his tracks.” Li sold $7 million worth of xAI stock before resigning in July and was expected to start at OpenAI in August.
Li is already under a temporary restraining order issued earlier this month that bars him from working on AI at OpenAI.
2. Jimmy Fraiture – The Source Code Transfer
Fraiture, another early engineer, is accused of airdropping xAI’s source code to his personal devices and later joining OpenAI.
3. Unnamed Finance Executive
A senior executive, believed to be former CFO Mike Liberatore, is accused of bringing over data center deployment strategies, described as xAI’s “secret sauce.”
Court filings even include a crude response he allegedly gave when questioned about violating confidentiality agreements.
Alleged Recruitment Tactics
The lawsuit claims OpenAI used an aggressive recruitment strategy. According to xAI, OpenAI recruiter Tifa Chen approached multiple xAI employees, offering multi-million dollar compensation packages.
Court documents suggest that some employees transferred files to personal devices within hours of these recruitment conversations.
Encrypted messages on Signal between Li and recruiters are also cited as evidence.
OpenAI’s Response
OpenAI strongly denies the allegations. A spokesperson dismissed the lawsuit as “the latest chapter in Mr. Musk’s ongoing harassment” and said the company has no interest in trade secrets from rivals.
Interestingly, one source told Business Insider that Li never actually worked at OpenAI, adding another twist to the case.
Broader Legal and Industry Context
This is not Musk’s first legal move against OpenAI. In August 2025, xAI filed another lawsuit accusing OpenAI and Apple of conspiring to monopolize the chatbot market by manipulating app store rankings.
Musk and OpenAI also share a complicated history. Musk co-founded OpenAI in 2015 but left in 2018 after disagreements over its direction.
Since then, he has repeatedly accused the company of abandoning its nonprofit mission and growing too close to Microsoft, which has invested $13 billion in OpenAI.
The current lawsuit seeks monetary damages, restitution, and a court order requiring OpenAI to destroy any models trained with stolen data.
What’s Next
The courts will now decide whether xAI can prove that OpenAI knowingly benefited from stolen trade secrets or simply hired employees in a competitive market.
A key hearing regarding Li’s restraining order is scheduled for October 7, 2025, which could provide early clues about how judges view xAI’s claims.
For now, the lawsuit adds another chapter to the high-profile battle between Elon Musk and OpenAI — a fight not just over employees and code, but over who controls the future of artificial intelligence.
News Gist
Elon Musk’s AI startup xAI has sued OpenAI in California, accusing it of stealing trade secrets by poaching key employees.
The lawsuit claims OpenAI gained access to Grok’s source code, data center strategies, and confidential plans, potentially saving billions in R&D.
FAQs
Q1. Who filed the lawsuit?
Elon Musk’s AI company, xAI, filed the lawsuit against OpenAI in California federal court.
Q2. What is xAI accusing OpenAI of?
xAI alleges OpenAI stole trade secrets by recruiting former employees and accessing confidential data like Grok’s source code and deployment strategies.
Q3. Which employees are involved?
The case names engineer Xuechen Li, engineer Jimmy Fraiture, and a senior executive believed to be ex-CFO Mike Liberatore.
Q4. How did OpenAI respond?
OpenAI denied all allegations, calling the case “harassment” by Musk, and stated it has no interest in rivals’ trade secrets.
Q5. What’s next in court?
A hearing on Li’s restraining order is scheduled for October 7, 2025, which may reveal the court’s early stance.
