OpenAI Can’t Dodge Elon Musk’s Fraud Claims in Restructuring Suit

An OpenAI spokesperson said that Musk’s actions are an unlawful bid to curb the company’s growth.

Advertisement
By Malathi Nayak, Bloomberg | Updated: 2 May 2025 18:35 IST
Highlights
  • Microsoft, OpenAI won dismissal of Musk’s racketeering claims
  • The judge has given Musk a chance to amend his plea against OpenAI
  • Musk says OpenAI was created to develop AI for the good of humanity

A lawyer for Musk welcomed the ruling

Photo Credit: Reuters

A judge narrowed claims in Elon Musk's lawsuit alleging that OpenAI broke its promise to function as a public charity by making plans to transform itself into a for-profit business. 

US District Judge Yvonne Gonzalez Rogers in Oakland, California, on Thursday ruled that the world's richest person can pursue fraud claims in the complaint he filed against OpenAI last year. She also declined to dismiss an unjust enrichment claim against OpenAI and Microsoft, a major investor in the startup. 

But she threw out claims of false advertising and breach of fiduciary duty claims against the startup. Both companies won dismissal of Musk's racketeering claims, but she gave the billionaire a chance to revise that allegation through an amended complaint.

Advertisement

In response to a request for comment, an OpenAI spokesperson cited a social media post from last month saying that Musk's actions are an unlawful bid to curb the company's growth for the benefit of his rival startup, xAI, that he launched in 2023.

Advertisement

A lawyer for Musk welcomed the ruling, saying it acknowledges his “serious allegations” that will proceed to trial.

“My client remains committed to protecting OpenAI's original charitable mission and the safe development of AI,” the attorney, Marc Toberoff, said in an email.

Advertisement

Representatives of Microsoft didn't immediately respond to a request for comment.

The legal wrangling between Musk and Sam Altman, who worked together to launch OpenAI a decade ago, is playing out as the startup is in talks with officials in Delaware and California over its restructuring plans and faces pressure to complete the overhaul by the end of 2025. If not, SoftBank Group would be able to drop the amount of funding it's contributing to the startup from $30 billion to $20 billion, as Bloomberg has reported, while OpenAI would have the option to find other investors.

Advertisement

Gonzalez Rogers recently said she intended to scale back the claims in the lawsuit when she scheduled a March trial over the dispute.

Musk has alleged the alliance OpenAI built with Microsoft after he left the startup's board in 2018 is a bid to dominate the generative AI industry that threatens free market competition by rivals. His lawyers also claim Microsoft knew OpenAI co-founders Altman and Greg Brockman were engaging in “a scheme to defraud Musk of his valuable contributions and backing to enrich themselves.”

Gonzalez Rogers granted a request by OpenAI and Microsoft to toss out Musk's claim they aided the fraud. But she ruled that Microsoft must face claims of interfering with OpenAI and Musk's contract, which he says called for the startup's technology to benefit the public.

Musk has “plausibly alleged that Microsoft knew of the charitable trust and took steps constituting ‘substantial assistance or encouragement' in the violation” of the contract, Gonzalez Rogers said in her ruling.

The case is Musk v. Altman, 24-cv-04722, US District Court, Northern District of California (Oakland).

© 2025 Bloomberg LP

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

 

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.

Further reading: OpenAI, Elon Musk, Microsoft
Advertisement

Related Stories

Popular Mobile Brands
  1. Samsung Galaxy Tab A11, Tab A11+ Design, Features Leaked Ahead of Launch
  2. iPhone 17 Pro Max Cosmic Orange Variant Out of Stock in the US, India: Report
  3. These New AI Features Are Coming to Your Updated iPhone, iPad and Mac
  4. Google Pixel 10 Review: A Brilliant Phone We Wanted to Love
  5. Vivo V60e Price in India, Specifications Surface Ahead of Launch
  6. iPhone 17 Series, iPhone Air Pre-Order Discounts Announced by Retailers in India
  7. Xiaomi 17 Pro Appears on Geekbench With Snapdragon 8 Elite Gen 5 SoC
  8. Xiaomi 17 Pro Render Gives Us a Good Look at Its Rear Display, Cameras
  1. Xiaomi 17 Pro Appears on Geekbench With Snapdragon 8 Elite Gen 5 SoC, 16GB RAM
  2. Moto G36 Design and Features Revealed by TENAA Listing; Likely to Feature 6,790mAh Battery, 6.72-Inch Display
  3. iPhone 17 Series, iPhone Air Pre-Order Discounts Announced by Croma, Ingram Micro India, and Vijay Sales
  4. Vivo V60e Price and Specifications Reportedly Surface Ahead of India Launch
  5. Sony Said to Be Planning State of Play Broadcast for Next Week
  6. France Could Block Crypto Firms With MiCA Licenses Due to Enforcement Gap Concerns
  7. Oppo Find X9 Pro With Dimensity 9500 SoC Scores 4 Million Points on AnTuTu; Spotted on Geekbench
  8. Xiaomi 17 Pro Design Render Gives Us a Good Look at Its Leica-Branded Rear Cameras, Secondary Display
  9. Clair Obscur: Expedition 33 Has Sold 4.4 Million Copies in Less Than Six Months of Launch
  10. Materialists Now Streaming on Netflix: What You Need to Know About Dakota Johnson’s Starrer Movie
Gadgets 360 is available in
Download Our Apps
Available in Hindi
© Copyright Red Pixels Ventures Limited 2025. All rights reserved.