OpenAI's recently surfaced internal call notes reveal Elon Musk’s previous backing for a $10 billion for-profit arm Initial Coin Offering (ICO) in early 2018 to fund the nonprofit’s projects. Musk’s decision to abandon the ICO and later exit from the AI startup set the company on its current path, combining a controlling nonprofit with a public benefit corporation (PBC).
OpenAI’s President, Greg Brockman, stated that he and Musk agreed in 2017 that a for-profit structure would be the AI startup’s next phase. However, negotiations encountered a significant obstacle when the AI startup refused to grant Musk full control of the for-profit arm.
The ChatGPT maker also rejected Musk’s proposal to merge the AI startup with his company, Tesla, opting instead for alternative methods to jointly achieve their objectives.
In response, Musk departed from the AI startup and expressed that the company had a 0% chance of success if it failed to raise billions of dollars. Currently, the company’s structure includes a controlling nonprofit that owns equity in the PBC, which is valued at over $130 billion.
Musk Sues OpenAI for Breach of Charitable Trust
In his latest court filing, Musk is suing the AI firm for breach of charitable trust and constructive fraud. However, the AI company is seeking to deny Musk any remedy for the alleged misconduct on technical grounds. OpenAI asserts that the Tesla boss lacks standing to sue because he made most of his contributions indirectly through personal donor-advised funds (DAFs).
The AI company also pointed out that Musk made additional donations through the fiscal sponsor YC.org, which it had designated to receive contributions on its behalf.
Meanwhile, Musk characterizes OpenAI’s arguments as "meritless," emphasizing that the court had already ruled he has standing to sue as a "settlor" of a trust. He further stated that he is the settlor of his contributions to the ChatGPT maker, whether made directly or indirectly.
Musk contributed approximately $38 million to the AI startup’s initial funding, representing roughly 60% of the total funding at the time. He also claimed to have made numerous non-monetary contributions, such as recruiting top talent, including the AI firm’s chief scientist, Ilya Sutskever.
OpenAI’s CEO, Sam Altman, acknowledged in his deposition that Musk’s initial contributions to the AI startup were crucial. Altman stated that he does not believe the AI company would exist without Musk.
Brockman Claims Musk is Harassing the AI Startup
According to Brockman, Musk’s latest lawsuit represents his fourth attempt to advance these claims, forming part of a broader strategy to impede the ChatGPT maker’s progress through harassment. Brockman believes Musk is employing underhanded tactics to gain an advantage for his xAI firm.
Brockman also claimed that Musk is grossly misrepresenting facts on record to further his harassment efforts. He noted that Musk had deliberately cherry-picked and shared snippets from written records to construct a different narrative.
"Elon did not think that OpenAI needed to remain solely a non-profit. As the context shows, he agreed that OpenAI needed both a non-profit and a for-profit entity—the exact structure OpenAI has today, and that Elon is now suing OpenAI over."
– Greg Brockman, President of OpenAI
Brockman further clarified that it was Ilya Sutskever, not Musk, who suggested that the nonprofit should continue to exist in some form and remain connected to the AI firm’s mission. Musk, in fact, created an OpenAI PBC (B-Corp) shortly after these discussions.
Brockman also noted that Musk’s court filings glossed over the details of these negotiations, describing them as intense and deeply personal. Brockman further pointed out that one of the individuals who had worked closely with Musk described him as someone who tends to vilify people who leave his companies.
The former Musk colleague also commented on Musk’s Mars ambition, which began as a philanthropic project and evolved into a commercial business.
Meanwhile, Brockman believes that Musk never truly treated OpenAI as an independent nonprofit. He explained that Musk appeared intent on starting a competitor, which is why the ChatGPT maker had secretly considered removing him from its board.