Elon Musk's xAI has filed a lawsuit against former engineer Xuechen Li, alleging he stole trade secrets and the entire codebase of its Grok AI model before moving to OpenAI, shortly after selling $7 million in xAI stock.
The lawsuit, filed on Thursday, in California federal court, claims Li admitted to the theft and attempted to cover his tracks during a meeting on August 14, with further stolen material discovered on his personal devices.
The stolen trade secrets are described as "cutting-edge AI technologies with features superior to those offered by ChatGPT and other competing products." xAI claims this information could allow OpenAI to significantly accelerate the development of ChatGPT, potentially saving billions of dollars and years of research and development.
Li, a Stanford PhD graduate in Computer Science who completed his degree in 2024, was one of xAI's earliest employees, joining in 2024 and working on developing and training the Grok AI model. He sold $4.7 million in xAI stock in June 2025, and xAI facilitated an additional $2 million share sale in July 2025, reportedly to retain him due to his "critical contributions."
The lawsuit alleges that Li copied confidential information and trade secrets from his xAI-issued laptop onto personal storage systems on July 25, 2025, the same day he received the cash proceeds from the stock sales. He resigned three days later, on July 28, 2025, after accepting a job offer from OpenAI, which was scheduled to begin on August 19.
xAI alleges Li took extensive measures to conceal his actions, including deleting browser history, clearing system logs, renaming files, and compressing them before uploading to personal devices.
During an August 14 meeting with xAI's legal team, Li is said to have admitted to intentionally taking company files and covering his tracks. Forensic analysis later uncovered additional stolen materials on his devices that he had not disclosed.
The lawsuit seeks an unspecified amount of monetary damages and a restraining order to block Li's move to OpenAI.
The legal action comes amid a larger, highly publicized rivalry between xAI and OpenAI, with Musk having previously sued OpenAI and its CEO Sam Altman over the company's shift from a non-profit to a for-profit structure. xAI has also recently sued OpenAI and Apple for alleged anti-competitive practices.