A Stability AI co-founder on Thursday sued the artificial-intelligence startup and its leader govt, claiming they defrauded him into promoting his 15% stake for $100 simply 3 months sooner than the corporate reached a $1 billion marketplace valuation.
In a criticism filed in San Francisco federal courtroom, Cyrus Hodes mentioned CEO and co-founder Emad Mostaque satisfied him Stability AI used to be “essentially worthless” whilst Mostaque labored on what would change into a well-liked picture generator, Stable Diffusion.
Hodes, a self-described “world-renowned thought leader” in man made intelligence, mentioned Stability AI and Mostaque additionally by no means published their talks with mission capital companies sooner than Mostaque purchased his stake in October 2021 and May 2022.
Stability AI final August coated up $101 million in financing that valued the London-based corporate at $1 billion, and has extra lately sought investment at a $4 billion valuation, the criticism mentioned.
Mostaque’s behavior “epitomizes corporate greed at its worst and simply shocks the conscience,” the criticism mentioned.
Hodes desires his 15% stake restored, plus punitive damages for the defendants’ alleged fraud and Mostaque’s alleged breach of fiduciary accountability.
Stability AI mentioned in an e mail: “The suit is without merit and we will aggressively defend our position.” It introduced the financing final October.
Hodes is a former marketing consultant to the United Arab Emirates and artificial-intelligence program director at Harvard University’s John F. Kennedy School of Government.
He mentioned he had labored “countless hours” since early 2020 at Stability AI, together with on an in the end unsuccessful venture 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 era is open to the general public, versus at closed supply corporations.
In May, the inventory picture supplier Getty Images requested a London courtroom to prevent Stability AI from promoting its image-generation device in Britain, mentioning alleged copyright violations.
Bloomberg News has reported that Stability AI lately raised lower than $25 million in a convertible observe providing after suffering to boost cash at a $4 billion valuation.
The case is Hodes v. Mostaque et al, US District Court, Northern District of California, No. 23-03481.