Musk’s xAI Sues OpenAI for Trade Secrets Amid Engineer Scandal

- xAI accuses OpenAI of poaching staff to steal Grok’s trade secrets. - Former xAI engineer allegedly transferred sensitive data before switching companies. On September 25, 2025, Elon Musk’s xAI filed a lawsuit against rival OpenAI in a California federal court, accusing the company of stealing trade secrets through an “unlawful campaign” to poach xAI employees. The claims center on OpenAI allegedly targeting staff with access to confidential information about Grok, xAI’s proprietary AI chatbot, which xAI asserts gave OpenAI an unfair competitive advantage in the race for AI dominance. The lawsuit highlights an incident involving former xAI engineer Xuechen Li, who reportedly downloaded the company’s entire codebase in July, shortly before joining OpenAI. On September 25, Reuters reported that court documents show Li admitted to transferring the files and allegedly tried to cover up his misconduct. The suit also accuses two other former xAI employees—a senior finance executive and engineer Jimmy Fraiture—of sharing sensitive company data with OpenAI. xAI argues these stolen materials could directly benefit OpenAI’s cutting-edge products, such as ChatGPT. This legal action follows a related case from August, when xAI sued Li for alleged trade secret misappropriation. On September 4, U.S. District Judge Rita Lin issued a temporary restraining order against Li that bars him from working on or discussing generative AI projects at OpenAI. The order also requires Li to hand over his devices for a forensic examination to ensure xAI’s confidential information is fully deleted. This injunction will remain in place pending an October 7 hearing, where the court will decide whether to extend the restrictions. In its court filings, xAI describes its trade secrets and operational strategies as pivotal to developing Grok and other AI innovations, and the company asserts this legal action is necessary to safeguard its intellectual property amid intense competition with OpenAI. This latest development escalates the ongoing rivalry between the two firms as they vie for leadership in the booming AI industry. The dispute underscores a broader conflict between Musk’s ventures and OpenAI. In another lawsuit from August, xAI and Musk’s X Corp sued OpenAI and Apple, accusing the two companies of monopolistic practices that undermine competitors. The suit alleges that OpenAI and Apple conspired to integrate ChatGPT into Apple devices and manipulate App Store rankings, disadvantaging rivals like xAI. Meanwhile, CoinMarketCap reported on September 25 that Ethereum (ETH) was trading at $1,721 as of 12:00 UTC, reflecting a 4.8% increase in 24-hour trading volume.