Elon Musk's xAI Hits Ex-Employee With Lawsuit Claiming Trade Secrets Ended Up At OpenAI

Bibhu Pattnaik

August 30, 2025

Elon Musk‘s xAI has initiated legal proceedings against a former engineer. The firm alleges that the engineer stole trade secrets and subsequently took them to rival firm OpenAI.

As per a report by Reuters, xAI lodged the lawsuit in a federal court in California last Thursday. The company accuses Xuechen Li, a former employee, of pilfering confidential information pertaining to its Grok chatbot and taking it to his new position at OpenAI earlier this month.

The lawsuit underscores the ongoing rivalry between Musk’s xAI and OpenAI, and the fierce competition in the tech industry for AI talent. Notably, OpenAI is not listed as a defendant in the lawsuit.

xAI alleges that Li, who joined the company as an engineer last year, took its trade secrets in July, shortly after accepting a job offer from OpenAI and selling $7 million worth of xAI stock.

Also Read: Here’s How Sam Altman Quietly Replaced Elon Musk as Donald Trump’s Go-To AI Advisor

The lawsuit suggests that the stolen secrets could potentially enable OpenAI to upgrade its ChatGPT with xAI’s “more innovative AI and imaginative features.”

The lawsuit further mentions that Li confessed to stealing company files and “covering his tracks” during a meeting on August 14. xAI is seeking an unspecified amount in damages and a restraining order to prevent Li’s transition to OpenAI.

This lawsuit is significant as it brings to light the intense competition and rivalry in the AI industry. The alleged theft of trade secrets could potentially give OpenAI an unfair advantage, thereby disrupting the balance in this highly competitive field.

Furthermore, the case could set a precedent for how such disputes are handled in the future, potentially impacting the movement of talent between rival tech companies.

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