Stability AI co-founder sues agency, claims he was tricked into promoting stake for $100

A Stability AI co-founder on Thursday sued the artificial- intelligence startup and its chief govt, claiming they defrauded him in to promoting his 15% stake for $100 simply three months earlier than the corporate reached a $1 billion market valuation.

In a criticism filed in San Francisco federal courtroom, Cyrus Hodes stated CEO and co-founder Emad Mostaque satisfied him Stability AI was “essentially worthless” at the same time as Mostaque labored on what would change into a preferred picture generator, Stable Diffusion.

Hodes, a self-described “world-renowned thought leader” in synthetic intelligence, stated Stability AI and Mostaque additionally by no means revealed their talks with enterprise capital companies earlier than Mostaque purchased his stake in October 2021 and May 2022.

Stability AI final August lined up $101 million in financing that valued the London-based firm at $1 billion, and has extra just lately sought funding at a $4 billion valuation, the criticism stated.

Mostaque’s conduct “epitomizes corporate greed at its worst and simply shocks the conscience,” the criticism stated.

Hodes needs his 15% stake restored, plus punitive damages for the defendants’ alleged fraud and Mostaque’s alleged breach of fiduciary responsibility.

Stability AI stated in an electronic mail: “The suit is without merit and we will aggressively defend our position.” It introduced the financing final October.

Hodes is a former adviser to the United Arab Emirates and artificial-intelligence program director at Harvard University’s John F. Kennedy School of Government.

He stated he had labored “countless hours” since early 2020 at Stability AI, together with on an finally unsuccessful mission to assist governments reply sooner to the COVID-19 pandemic.

Stability AI describes itself because the “world’s leading open source generative AI company,” whose expertise is open to the general public, versus at closed supply corporations.

In May, the inventory photograph supplier Getty Images requested a London courtroom to cease Stability AI from promoting its image-generation system in Britain, citing alleged copyright violations.

Bloomberg News has reported that Stability AI just lately raised lower than $25 million in a convertible observe providing after struggling to boost cash at a $4 billion valuation.

The case is Hodes v. Mostaque et al, U.S. District Court, Northern District of California, No. 23-03481.