Elon Musk’s xAI Sues Ex-Engineer Over Stolen Grok AI Secrets

Elon Musk’s artificial intelligence company xAI filed a lawsuit on August 28, 2025, in the U.S. District Court for the Northern District of California, accusing former engineer Xuechen Li of stealing trade secrets and violating the Computer Fraud and Abuse Act.

Li joined xAI on February 26, 2024, as a member of the technical team, where he contributed to the development of the xAI Grok AI application and gained access to its core proprietary and commercial information.

Between June and July 2025, Li sold approximately $7 million worth of xAI stock before resigning on July 28. On August 19, he joined OpenAI. At the time of his resignation, Li claimed he had complied with company policy and deleted all corporate data.

However, on August 11, xAI discovered that Li had downloaded confidential company data and its codebase. Musk later stated on X/Twitter that logs confirmed Li had taken the entire xAI codebase, an act Li has since admitted.

After the discovery, Li retained legal counsel, but according to xAI, during communications on August 14–15 he acknowledged the data theft. Still, the company alleges that the access credentials he provided were incomplete, preventing retrieval from his devices.

In its complaint, xAI argues that the stolen trade secrets are worth billions of dollars, potentially saving competitors like OpenAI equivalent sums in research and development costs. The company accuses Li of violating the Employee Confidentiality and Invention Assignment Agreement, the Termination Certificate, provisions of 18 U.S.C. §1836 and subsequent sections concerning trade secret theft, as well as the California Computer Data Access and Fraud Act.

xAI has asked the court to issue the following orders:

• A temporary restraining order
• Surrender of all devices, accounts, and access credentials within 14 days
• Forensic examination of the devices
• Return of all xAI data and permanent deletion of copies
• A ban preventing Li from accessing his devices, exploiting the stolen data, or destroying evidence
• A prohibition on Li engaging in generative AI work at OpenAI or any competitor

Additionally, xAI seeks both preliminary and permanent injunctions, along with compensation for actual damages, compensatory damages, treble damages, punitive damages, exemplary damages, as well as attorney’s fees and litigation costs.

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