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xAI Sues OpenAI in California, Alleging Trade-Secret Theft via Poached Staff

The complaint asks a federal judge for damages together with injunctions to purge xAI material, including destruction of any models allegedly derived from it.

Open AI and xAI logos are seen in this illustration taken on September 12, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
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Overview

  • xAI’s federal suit, filed Sept. 24 in the Northern District of California, alleges a coordinated effort by OpenAI to induce former xAI employees to share Grok-related source code and data-center deployment playbooks.
  • The filing names ex-engineer Xuechen Li, early engineer Jimmy Fraiture, and a senior finance executive, alleging Li uploaded the entire codebase to a personal cloud and that Fraiture used AirDrop multiple times to transfer code.
  • The complaint describes recruiter-led outreach and, in Li’s case, cites encrypted messages and a handwritten confession, while asserting the finance executive brought xAI’s “secret sauce” for rapid data-center rollout.
  • OpenAI denies the accusations and characterizes the case as harassment, saying it has no interest in competitors’ trade secrets and no tolerance for confidentiality breaches.
  • In a related case, xAI earlier secured a temporary order on Sept. 3 restricting Li’s work on AI with OpenAI, as the broader legal clash between the rivals advances with potential consequences for IP protection and hiring practices in AI.