Elon Musk drops OpenAI fraud claims as most xAI co-founders depart startup

Elon Musk has dropped his fraud claims against OpenAI and its co-founders Sam Altman and Greg Brockman, significantly narrowing the scope of his lawsuit just as the case approaches trial. This strategic decision represents a major development in one of the tech industry's most high-profile legal battles, though Musk's remaining claims against the AI company are expected to continue.

The move comes as Musk faces mounting challenges across his business empire. Meanwhile, his artificial intelligence venture xAI is experiencing significant organizational turbulence. According to reporting on the company's internal struggles, every xAI cofounder other than Musk has now exited, with dozens of engineers and program staff members also departing. The departures have accelerated in recent months, with eight cofounders leaving since January, including Zihang Dai and Guodong Zhang, who exited in March. Only two of the 11 people who originally started the company with Musk in 2023—Manuel Kroiss and Ross Nordeen—remain at the company.

The departures appear linked to multiple stressors within xAI. The company is undergoing a merger with SpaceX, facing a $60 billion option to acquire the AI startup Cursor, and preparing for an upcoming public offering. These structural changes have reportedly contributed to exhaustion among the workforce and organizational instability that has prompted the exodus of key talent.

Beyond internal challenges, xAI is also facing external legal pressures. The Trump administration's Department of Justice has joined xAI in its legal challenge to Colorado's new state law designed to prevent discrimination by autonomous tools in employment and other areas, signaling potential federal involvement in ongoing disputes over AI regulation.