Elon Musk v OpenAI, Court Filing, retrieved on April 30, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part of this filing here. This part is 16 of 29.

COUNT IV: VIOLATIONS OF FEDERAL CIVIL RICO, 18 U.S.C. § 1962(c) (Against Altman, Brockman, and the OpenAI For-Profit Entities)

197. Plaintiff re-alleges and incorporates by reference paragraphs 1 through 196 inclusive, as though fully set forth herein.

198. The federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. §§ 1962, 1964, provides a private right of action for plaintiffs to recover against defendants who harm them by conducting an enterprise through a pattern of racketeering activity, as well as defendants who conspire to do so.

A. Wire Fraud Predicate Offenses

199. Defendants knowingly participated in a scheme to exploit Musk and others by fraudulently inducing him to make significant financial and other contributions to develop valuable AI/AGI for ostensibly charitable purposes, which Defendants exploited to enrich themselves, as alleged hereinabove.

200. In furtherance of their scheme, Defendants transmitted, or caused to be transmitted, by means of wire communication in interstate commerce, writings, signs, signals, pictures, and sounds, in violation of 18 U.S.C. § 1343. The specific wirings in furtherance of the scheme to defraud Musk include, but are not limited to the following:

a. On May 25, 2015, in correspondence by email, Altman proposed to Musk that they start an AI lab and “structure it so that the tech belongs to the world via some sort of nonprofit[,]” and further represented: “Obviously we’d comply with/aggressively support regulation.”

b. On June 24, 2015, Altman corresponded with Musk by email and represented: “The mission would be to create the first general AI and use it for individual empowerment—ie [sic], the distributed version of the future that seems the safest. More generally, safety should be a first-class requirement.” “The technology would be owned by the foundation and used ‘for the good of the world[.]’”

c. On November 22, 2015, Brockman sent Musk further email correspondence representing: “I hope for us to enter the field as a neutral group looking to collaborate widely and shift the dialog towards being about humanity winning rather than any particular group or company. (I think that’s the best way to bootstrap ourselves into being a leading research institution.).”

d. On December 8, 2015, Altman sent Musk via email the following announcement for his review:

OpenAI is a non-profit artificial intelligence research company [whose] goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. Since our research is free from financial obligations, we can better focus on a positive human impact. . . . We believe AI should be . . . as broadly and evenly distributed as possible. . . . As a non-profit, our aim is to build value for everyone rather than shareholders . . . and our patents (if any) will be shared with the world.

e. On March 14, 2017, Musk was emailed (with Brockman copied) a draft online post for his review, promising: “We will share our research and techniques unless there is evidence that doing so would harm humanity.” The post stated “openness [is] desirable” because it helps to: “Ensure that AI progress benefits everyone, rather than primarily benefiting whoever controls the technology.”

f. On September 21, 2017, after Musk rebuffed Altman’s efforts to turn OpenAI, Inc. into a for-profit company, Altman wrote to Musk via email reassuring him: “[I] remain enthusiastic about the nonprofit structure!”

g. On April 2, 2018, Altman emailed Musk a draft OpenAI, Inc. Charter to review, which it later published on its website, stating: “We commit to use any influence we obtain over AGI’s deployment to ensure it is used for the benefit of all, and to avoid enabling uses of AI or AGI that harm humanity or unduly concentrate power. Our primary fiduciary duty is to humanity.”

h. On March 11, 2019, in marketing the creation of OpenAI, L.P., Defendants represented: “The General Partner’s duty to this mission and the principles advanced in the OpenAI Inc. Charter take precedence over any obligation to generate a profit.” On March 6, 2019, Altman emailed Musk a draft of this announcement, promising: “We’ve designed OpenAI LP to put our overall mission—ensuring the creation and adoption of safe and beneficial AGI—over generating returns for investors.”

201. Defendants intended Musk to rely on their express promises, representations, and assurances and in good faith, Musk reasonably did rely on them to his detriment. Based thereon, Musk caused to be wired tens of millions of dollars of seed money to OpenAI, Inc. as follows:

202. During this period, Musk further invested his time, reputation, and connections to recruit top AI scientists and engineers for the OpenAI project, which included the transmission of emails and cellular telephonic communications.

203. In addition, Defendants in their marketing, advertisements, and promotions made knowingly false and/or misleading representations to defraud the public and induce the false belief that OpenAI, Inc. would be a non-profit whose charitable mission is to develop safe and open-source AI/AGI technology for the public good, not private gain. And these public pronouncements further served to reassure Musk.

204. From December 11, 2015 to today, OpenAI’s website represented:

• “OpenAI is a non-profit artificial intelligence research company [whose] goal is to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return. Since our research is free from financial obligations, we can better focus on a positive human impact.”

• “We believe AI should be an extension of individual human will and, in the spirit of liberty, as broadly and evenly distributed as possible.”

• “Because of AI’s surprising history, it’s hard to predict when human-level AI might come within reach. When it does, it’ll be important to have a leading research institution which can prioritize a good outcome for all over its own self-interest.”

• “As a non-profit, our aim is to build value for everyone rather than shareholders.”

• “Our primary fiduciary duty is to humanity. We anticipate needing to marshal substantial resources to fulfill our mission, but will always diligently act to minimize conflicts of interest among our employees and stakeholders that could compromise broad benefit.”

• “Researchers will be strongly encouraged to publish their work, whether as papers, blog posts, or code, and our patents (if any) will be shared with the world.”

• “Our mission is to ensure that [AGI] benefits all humanity, primarily by attempting to build safe AGI and share the benefits with the world.”

205. Defendants knew or could have reasonably foreseen that their promises and representations would be relied upon by Musk and other contributors to OpenAI, Inc.

206. Altman, Brockman, and the OpenAI For-Profit Entities each knew of, and participated in, numerous acts of wire fraud. Defendants knowingly and repeatedly accepted contributions from Musk and the public in order to develop AGI with no intention of honoring their promises and representations once AGI was in reach. As alleged hereinabove, GPT-4, GPT-4T, and GPT-4o are all closed source and shrouded in secrecy for Defendants and Microsoft’s gain.

207. It was reasonably foreseeable that interstate wire communications would be used in connection with Defendants’scheme. In addition to the fraudulent wire transmissions described above, Defendants relied on wires to receive the financial contributions of Musk and, on information and belief, other contributors, and to invest these funds in their fraudulent scheme. On information and belief, Defendants received many or all of these funds through an online wire, deposited such funds into Defendants’ accounts through an online wire, and relied on email or other forms of electronic communication to exchange information about their receipt and usage of these misappropriated funds and contributions.

208. Altman and Brockman used Musk’s contributions to fund and support OpenAI, Inc.’s research and development and on information and belief, to launch dozens of for-profit shell entities (the OpenAI For-Profit Entities). The OpenAI For-Profit Entities furthered Defendants’ scheme by harboring and exploiting OpenAI, Inc.’s valuable AI/AGI technology and helping to facilitate and conceal Defendants’ profiteering and self-dealing.

209. This private, complex profitmaking arm of OpenAI, in which on information and belief, Microsoft and Altman are significant shareholders, is publicly cloaked as a mere fundraising apparatus, but in reality, is the foundation of Defendants’ scheme to control, co-opt, and cash in on OpenAI, Inc.’s valuable technology developed with Musk’s significant contributions.

210. When Altman and Brockman launched OpenAI, L.P. (now OpenAI OpCo, LLC), they transferred most of the non-profit’s staff over to the new company, which also now houses and operates much of OpenAI’s technological research and development. Defendants’ reshuffling of OpenAI, Inc.’s assets served to conveniently shield them and their scheme from public scrutiny and to evade the financial disclosures non-profits like OpenAI, Inc. must make. Each of these predicate acts by Altman and/or Brockman were committed within the scope of their employment, officership, and/or directorship position(s) at, or their agency relationship with, the OpenAI For-Profit Entities.

211. In addition, Altman, with the assistance and/or cooperation of Brockman and/or the OpenAI For-Profit Entities, brazenly engaged in selfdealing.

212. For instance, it was recently reported that Altman induced OpenAI to partner with Reddit in a deal to bring Reddit’s content to OpenAI’s ChatGPT. On information and belief, Altman and/or entities he controls own 7.6% of Reddit and, after the OpenAI deal was announced, Reddit’s stock went up 10%, boosting Altman’s stake by $69 million.

213. Further, on information and belief, Altman caused OpenAI to sign a $51 million AI chip deal with Rain AI, a company in which he also held a significant interest. On information and belief, Altman and Jony Ive, formerly of Apple, have also reportedly launched their own AI device company, which plans to exploit OpenAI’s technology to compete with the iPhone. And, on information and belief, Altman is currently causing OpenAI, Inc. to work out a deal with Altman’s Helion Energy for OpenAI, Inc. to buy large amounts of electricity to power its data centers.

214. Defendants have also caused OpenAI, Inc. to exclusively license and/or furnish its now-closed technology to Microsoft, in partnership with Defendants, including its recent GPT-4, GPT-4T, and GPT-4o models for Defendants and Microsoft’s private gain, in contravention of the repeated representations to Musk and other contributors that its technology would be predominantly open source for the benefit of the public and humanity.

215. Defendants knew their representations and promises alleged hereinabove were false when made and they had no intention of performing such promises and failed to perform them. Once they convinced Musk to back OpenAI, Inc., Defendants’ aim was to develop valuable AI/AGI and exploit it for their own enrichment. Defendants intentionally concealed their fraudulent conduct, which prevented Musk from discovering their scheme, notwithstanding his exercise of due diligence. Musk would not have contributed to OpenAI, Inc. if he knew of Defendants’ true intentions and scheme.

216. Altman and Brockman directly and indirectly committed or aided and abetted these numerous predicate acts of wire fraud in furtherance of their scheme. The predicate acts by the OpenAI For-Profit Entities were committed by Altman, Brockman, and/or representatives of such entities acting through, or on behalf of and for the benefit of those entities. Each of these Defendants voluntarily and intentionally committed and/or aided and abetted the commission of the predicate acts to effectuate and/or further their illicit scheme.

B. Pattern of Racketeering Activity

217. Defendants committed multiple predicate acts of wire fraud which are indictable under the provisions of the U.S. code enumerated in 18 U.S.C. § 1961(1)(B). Defendants did knowingly, willfully, and unlawfully conduct or participate, directly or indirectly, in a pattern of racketeering activity within the meaning of 18 U.S.C. § 1961(5).

218. Altman, Brockman, and/or the OpenAI For-Profit Entities committed, or conspired with or aided and abetted other Defendants in committing, at least two predicate acts of wire fraud constituting a continuous course of conduct spanning a period from at least March 2015 to the present. The temporal duration and the number of predicate acts are so extensive as to constitute a pattern of racketeering activity with, at minimum, closed-ended continuity, though on information and belief, such conduct is continuing—e.g., Defendants are continuously forming new for-profit entities and continuing to promote their false non-profit mission—and there exists a specific threat it will persist indefinitely, constituting a pattern of racketeering activity that is openended.

219. In order to implement their scheme, Defendants used the interstate wires to defraud Musk, as alleged herein. Such acts not only shared a common or related result, participants, and victims, but also shared a common method of commission. Defendants’ acts of racketeering were all committed for the purpose of defrauding Musk and others of valuable financial and other contributions in furtherance of a scheme to develop valuable AI/AGI technology to be wrongfully exploited for Defendants’ self-enrichment.

220. On information and belief, the public, including without limitation, consumers, donors to OpenAI, Inc., and other contributors such as its leading AI scientists and engineers who were induced by Defendants’ fake humanitarian mission, were also victimized by their fraudulent scheme. Defendants’ fraudulent wire communications concerning OpenAI, Inc.’s non-profit mission to develop predominantly open-source AI/AGI technology and conduct research to be shared with the public for the benefit of humanity, have caused these individuals and/or groups to fund, support, back, and/or otherwise contribute to OpenAI, Inc. in the false belief that they were doing so to help further the nonprofit’s humanitarian purpose.

221. On information and belief, Altman, Brockman, and the OpenAI For-Profit Entities’ racketeering yielded financial and other contributions from Musk and others, which were, in turn, used to develop valuable AI/AGI technology that Altman along with other Defendants leveraged and exploited to attract the powerful tech giant Microsoft and gain undue influence, which they used to acquire and/or maintain significant control over OpenAI, Inc. and its operations.

222. To illustrate, on November 17, 2023, OpenAI, Inc.’s Board dismissed Altman as CEO and from the Board because, on information and belief, he had lied to the Board to obstruct its oversight of him, and because the Board was concerned by Altman’s numerous conflicts of interest and instances of self-dealing.

223. Prior to his dismissal, Altman had aligned himself with Microsoft and orchestrated deals causing OpenAI, Inc. to become inextricably dependent on Microsoft—e.g., on information and belief, Microsoft had paid only a fraction of its reported $13 billion commitment to OpenAI, and OpenAI, Inc. needed Microsoft’s cloud computing system to continue to operate and function. On information and belief, when Microsoft learned of Altman’s dismissal, it and Altman made a concerted and coordinated effort to use their influence and leverage to threaten and pressure OpenAI, Inc.’s Board to have Altman quickly reinstated.

224. On November 21, 2023, Altman was reinstalled as CEO just days after his dismissal. Upon his return, Altman purged the Board members who had dismissed him and handpicked new compliant Board members, effectively taking over OpenAI, Inc. in furtherance of Defendants’ scheme.

225. Microsoft too obtained an influential observer seat on the Board, permitting it to exercise internal pressure and further influence over OpenAI, Inc.’s operations. Recently, on July 9, 2024, Microsoft relinquished its seat amid scrutiny from antitrust agencies in the U.S. and Europe investigating its close relationship with OpenAI.

226. On information and belief, Defendants’ illicit activities have placed them under investigation by multiple federal agencies including the Securities and Exchange Commission and the Federal Trade Commission, U.K. and E.U. regulators, and as of July 22 and August 1, 2024, the U.S. Senate. Defendants are also the subject of numerous consumer advocacy complaints to the California Attorney General, which have encouraged the AG to investigate Defendants’ wrongful exploitation of OpenAI, Inc. for personal gain.

C. Violation of Section 1962(c)

227. Altman, Brockman, and the OpenAI For-Profit Entities are “persons” within the definition of 18 U.S.C. § 1961(3), and at all relevant times were employed by and/or associated with OpenAI, Inc.

228. OpenAI, Inc. is an “enterprise” as defined by 18 U.S.C. § 1961(4) (the “Enterprise”), and engaged in, and its activities affected, interstate and foreign commerce. At all relevant times, OpenAI, Inc. had an existence separate and distinct from the pattern of racketeering in which Altman, Brockman, and the OpenAI For-Profit Entities engaged.

229. Altman, Brockman, and the OpenAI For-Profit Entities wrongfully conducted or participated, directly or indirectly, in the conduct of the Enterprise’s affairs through a pattern of racketeering activity.

230. Altman, Brockman, and the OpenAI For-Profit Entities infiltrated the Enterprise. Altman and Brockman are OpenAI, Inc.’s CEO and CTO respectively, and at various times have sat, and Altman currently sits, on its Board. The OpenAI For-Profit Entities, which on information and belief are largely owned, operated, and/or controlled by Altman and Microsoft, have now so thoroughly infiltrated the non-profit and are so intertwined with OpenAI, Inc. so as to effectively participate in, manage, control, and/or operate the Enterprise with impunity.

231. Altman, Brockman, and the OpenAI For-Profit Entities’ racketeering acts were committed in furtherance of a common fraudulent scheme to wrongfully exploit the financial and other contributions of Musk and others to OpenAI, Inc. to develop valuable AI/AGI technology and assets, which Altman, Brockman, and the OpenAI For-Profit Entities then illicitly leveraged to enrich themselves.

232. Altman induced Musk to contribute his money and resources to the Enterprise in the belief he was supporting an open-source, not-for-profit AI/AGI research foundation for the benefit of mankind, when, in fact, he was unwittingly providing capital, support, and/or services to a coordinated, covert profiteering scheme for Defendants’ private gain.

233. Based on Altman and Brockman’s fraudulent misrepresentations, Musk contributed approximately $44,811,795.00[20] of seed capital to OpenAI, Inc. and invested his time, reputation, and connections to recruit premier AI scientists and engineers for the project.

234. Defendants then furthered the scheme by using these contributions to develop valuable AI technology, which, once it approached marketable AGI, they kept closed source and exclusively licensed and/or furnished to Microsoft for Defendants’ private gain.

235. On information and belief, Altman and Brockman furthered the scheme by launching the OpenAI For-Profit Entities and transferring much of OpenAI, Inc.’s staff over to them. On information and belief, the OpenAI ForProfit Entities also now operate most of the non-profit’s research and development, from which Altman, Brockman, and the OpenAI For-Profit Entities stand to make a veritable fortune.

236. In addition, on information and belief, Altman along with other Defendants have engaged in unbridled self-dealing under cover of the “nonprofit.” On information and belief, the OpenAI For-Profit Entities facilitated and/or aided and abetted Defendants’ conflicted dealings and furthered the scheme by accepting receipt of OpenAI, Inc.’s misappropriated assets and staff, and helping to conceal Defendants’ fraudulent conduct.

237. On information and belief, Altman, Brockman, and the OpenAI For-Profit Entities have been and will continue to be enriched by their exploitation of OpenAI, Inc.’s assets, made possible by Musk’s fraudulently obtained funding and contributions.

238. The unlawful actions of Altman, Brockman, and the OpenAI ForProfit Entities directly, illegally, and proximately caused and continue to cause injuries to Musk in his business and property. In furtherance of their scheme and through fraudulent acts, Defendants caused Musk to make financial and other contributions to OpenAI, Inc., to which they were not entitled. But for Defendants’ knowing misrepresentations, Musk would not have made such contributions and it was reasonably foreseeable to Defendants that their scheme would harm Musk.

239. Pursuant to the civil remedy provisions of 18 U.S.C. § 1964(c), Musk is hereby entitled to recover three times the damages he sustained, reasonable attorneys’ fees, and costs of litigation, as well as any other relief as authorized by statute.

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[19] On information and belief, Musk’s initial $10 million in donations to OpenAI, Inc. in 2016 were first wired to Altman’s “YC Org.,” and then wired to OpenAI, Inc. once OpenAI, Inc. obtained its section 501(c)(3) status.

[20] In addition to the wired contributions tabled above, Musk donated Model 3 Teslas to OpenAI, Inc., valued at $248,295.00.