The battle for AI dominance just got a messy new chapter, and it’s got all the makings of a billion dollar betrayal.
Elon Musk’s artificial intelligence startup, xAI, has filed a bombshell lawsuit against ex-employee Xuechen Li, accusing him of stealing trade secrets from its Grok chatbot and smuggling them over to OpenAI, where he was set to start his new job.
According to court papers filed in California, Li didn’t just walk out quietly. He allegedly swiped cutting-edge AI code “with features superior to those offered by ChatGPT”, cashed out $7 million in xAI stock, and then covered his tracks by deleting logs, renaming files, and wiping histories.
Investigators say Li even admitted during an August 14 meeting that he’d taken company files, only for Musk’s team to later discover even more hidden on his devices. The lawsuit claims the stolen tech could give OpenAI the edge by supercharging ChatGPT with xAI’s “more imaginative features.”
Timeline of Events
- 2024–2025: Xuechen Li works as an engineer at xAI, helping train and develop Grok.
- July 2025: Li allegedly steals confidential files after accepting a job at OpenAI.
- July 2025: He cashes out about $7 million in xAI stock.
- July 28, 2025: Li resigns from xAI.
- August 14, 2025: Li allegedly admits to stealing company files during a meeting; investigators later find more hidden material.
- August 19, 2025: Li was scheduled to start at OpenAI (in some sources it is reported that he did upload it).
- August 26, 2025: xAI’s internal forensic investigation uncovers more evidence.
- August 29, 2025: xAI files a lawsuit in California federal court accusing Li of trade secret theft and computer fraud.
It’s not the first time Musk has gone after his old company. He co-founded OpenAI back in the day but has since turned into one of its loudest critics, accusing CEO Sam Altman of abandoning its mission to “benefit humanity.” Musk sued OpenAI earlier this year, and OpenAI fired back with a countersuit calling it harassment. Just this week, Musk also sued OpenAI and Apple, claiming they’re monopolizing AI on Apple devices.
As for Li, his alleged midnight data grab could be the juiciest twist yet. xAI is demanding cash damages and a restraining order to block him from ever using what he took. OpenAI isn’t named as a defendant.. for now.
Behind all the legal drama, one thing’s crystal clear: the AI talent war is heating up fast, and this isn’t just about lines of code. It’s about who gets to own the future.