Elon Musk’s xAI Sues OpenAI Again, This Time Over Alleged Trade Secret Theft

Xai, an artificial intelligence company for Elon Musk, filed a federal lawsuit against Openai on Wednesday, accusing them of orchestrating a “adjusted, unfair and illegal campaign” to steal unique technologies through targeted employee poaching.

Complaint, Submit In California, Openai claims it is “by hook or Crook.” Former Xai employees have led them to misuse the company’s entire source code, training methods, and the overall data center deployment strategy.

Musk, co-founder of Openry alongside Sam Altman, Greg Brockman and Ilya Satsukeiber in 2015, resigned from the board in 2018, citing conflicts of interest between his company Tesla and its self-driving vehicles. Since then, the tech billionaire has envisioned a militant stance against Openai, including filing another lawsuit last month.

Openai recruiter Tifa Chen targeted multiple Xai employees at the same time, providing multi-million dollar packages to engineers, who stole the source code and uploaded it to personal devices within hours of communication.

Xuechen Li, an early Xai engineer, was told in July 2025 that he “uploaded the entire Xai source code base to his personal cloud account” and later “recognized by hand-written confession” he admitted to misuse Xai code and presentation materials in training techniques.

Details of the lawsuit showing Li’s code theft show that it happened within hours of Chen and the encrypted signal message, allegedly responding “No Way!” After Li copied the files, before Openai extended the multi-million dollar offer.

Another early Xai engineer, Jimmy Fraiture, after signing with Openai, was reportedly stole “a large portion of Xai’s code,” stealing experimental folders from four co-founders, and using the Airdrop feature to “transfer “confidential source code” “at least five times.”

The unnamed senior financial enforcers who set out for Openai were called the “secret sources” of these operations, and said, “Their data center team. Their speed and accuracy blew me away. I wouldn’t want to compete with them.”

The executives then played fewer roles in Openai, focusing on data center spending strategies despite having no prior AI experience, and are said to have “responded with a rough sexual explosive bone” when faced with obligations of confidentiality.

Navodaya Singh Rajpurohit, legal partner at Coinqu Consulting, said Decryption The case “leaning heavily towards employee poaching” states that whether or not the intersecting from offensive recruitment to illegal misuse “relies on evidence not included in the submission” and that “employment alone is not sufficient to prove the misuse of trade secrets.”

Ishida Sharma, managing partner at Fathom Legal, said Decryption Xai needs to broadly define “secret sources” and group GPU racks, vendor contracts, pricing curves, and orchestration playbooks. This can describe “faster developments and cheaper scaling, etc.” without putting accurate technical diagrams or formulas on the records.

“The angle of recruiters is difficult,” Sharma said. This is because responsibility depends on whether the recruiter acted as an Openai agent with knowledge of the company.

For Openai’s defense, the strongest approach is to show independent creation through “time stamped records: internal GIT commits, R&D notes, supplier invoices, emails”, and previous documents provide the most reliable.

Xai seeks the damages, compensation and injunctions Openai needs to purge Xai materials from its system and even destroy the model.

The lawsuit will add to Mask’s continued legal battle with Openry last month, as well as his company. Antimonopoly law has been submitted Insisting their exclusive iPhone integration against Apple and Openai creates unfair market dominance.