Elon Musk backed $10B for-profit OpenAI ICO in early 2018, internal notes reveal

OpenAI’s recently surfaced internal call notes reveal Elon Musk’s previous backing for a $10 billion for-profit arm 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, said he and Musk agreed back in 2017 that a for-profit structure would be the AI startup’s next phase. However, negotiations hit a snag when the AI startup blatantly refused to give Musk full control of the for-profit arm.

The ChatGPT maker also rejected Musk’s proposal to merge the AI startup with his Tesla, opting for alternative means to jointly achieve the objective.

In response, Musk stormed out of the AI startup and gave the company a 0% chance of success if it failed to raise billions of dollars. Today, the company’s structure includes a controlling nonprofit that owns equity in the PBC, currently 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 seeks to deny Musk any remedy for the alleged misconduct on technical grounds. It 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 calls OpenAI’s arguments “meritless,” emphasizing that the court had already ruled he has standing to sue as a “settlor” of a trust. He added that he is the settlor of his contributions to the ChatGPT maker, whether directly or indirectly.

Musk contributed about $38 million to the AI startup’s initial funding, which accounted for roughly 60% of the total funding. He also claimed he made countless non-monetary contributions, such as recruiting top talent, including the AI firm’s chief scientist, Ilya Sutskever. 

OpenAI’s CEO, Sam Altman, also acknowledged in his deposition that Musk’s initial contributions to the AI startup were crucial. He does not think the AI company would exist without Musk.

Brockman says Musk is just harassing the AI startup

According to Brockman, Musk’s latest lawsuit is his fourth attempt to make these claims, and part of his broader strategy to delay the ChatGPT maker’s progress through harassment. He believes Musk is using 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. He noted that Musk had deliberately cherry-picked and shared snippets from written records to tell a different story. 

“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 also clarified that it was Ilya, not Musk, who suggested that the nonprofit should continue to exist in some form and remain connected to the AI firm’s mission. Musk actually created an OpenAI PBC (B-Corp) shortly after these discussions. 

Brockman further noted that Musk’s court filings glossed over the details of these negotiations, and they were intense and deeply personal. Brockman also pointed out that one of the people who had worked closely with Musk described him as someone who tends to vilify people who quit his companies.

The former Musk colleague also noted Musk’s Mars ambition, which started as a philanthropic project and grew into a commercial business.

Meanwhile, Brockman believes that Musk never truly treated OpenAI as an independent nonprofit. He explained that Musk seemed intent on starting a competitor, which is why ChatGPT maker had secretly considered removing him from its board.

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