Co-founder sues Stability AI, the developer of Stable Diffusion, as being deceived for less than 20,000 yen for shares worth more than 68 billion yen
The co-founder of Stability AI, the developer of the image-generating AI
Case 3:23-cv-03481 Document 1 Filed 07/13/23
(PDF file) https://assets.bwbx.io/documents/users/iqjWHBFdfxIU/rDlbbQW5zCKk/v0
Stability AI co-founder says he was tricked into selling stake for $100 |
Plaintiff Saidera Hodes gave another co-founder and CEO Emad Mostak a 15% stake in Stability AI in two transactions, one in October 2021 and one in May 2022, for as little as $100. 13,700 yen).
However, after that, in August 2022, Stability AI raised a large amount of funding and won $ 101 million (about 13.88 billion yen) from venture capital, taking the world by storm in the field of image generation AI. ) succeeded in making rapid progress as an up-and-coming company. At the time of writing the article, Stability AI is trying to raise funds at a valuation of $ 4 billion (about 550 billion yen). 120 million yen).
At the time that Mr. Hodes sold his shares, Stability AI was on the brink of bankruptcy due to financial difficulties. It seems that he was holding However, behind the scenes, Mr. Mostak held discussions with venture capital, and made steady progress in efforts to restore the company's management, such as establishing a new business plan to ``generate images from text''. I was.
However, Mostak did not tell Hodes of the above plans, instead saying, 'Our company is committed to climate change and will not benefit from this new business model, primarily with non-profit research institutes. We will work together,' he said. Mr. Hodes, who believed Mr. Mostak's words, gave up on Stability AI there and decided to sell the stock.
Stability AI was not working on the project 'generate images from text' from the beginning. Founded in 2019 by former hedge fund employee Mostak, Stability AI has developed several generative AIs with Hodes, former advisor to the United Arab Emirates Minister for Artificial Intelligence and former Harvard University AI Program Director. Develop some plans to leverage for your use case.
Plans include harnessing the power of AI to stabilize global oil markets, or using AI to promote religious tolerance and defuse inter-religious hatred to stabilize politics in the Middle East. It was a variety of things. Some of these projects have been successful as businesses, such as successful talks with Saudi Arabian political funds and the trust of government and financial leaders who are interested in AI, thanks to Mr. Hodes' help. He said.
The final result was a project called ' Collective and Augmented Intelligence Against Covid-19 (CAIAC) ', which aims to provide public institutions with useful data on the pandemic of the new coronavirus infection. This project was launched in March 2020, with Mr. Hodes playing a central role in the development under the supervision of Mr. Mostak.
The complaint states that Mr. Hodes worked full-time for about 18 months, worked on CAIAC, and spent more than $ 15,000 (about 2 million yen) in personal expenses to cover the company's expenses. However, Mr. Hodes' efforts did not bear fruit, and CAIAC was significantly delayed and almost failed. Mr. Hodes attributed this to ``Mr. Mostak's negligence, incompetence, and lack of transparency to key employees,'' claiming that employees, including Mr. Hodes, received only minimal compensation. Various stakeholders involved in the project say they have lost faith in Mostak and Stability AI.
In addition, Mr. Hodes also claimed that Mr. Mostak was 'embezzling the company's funds to pay the rent' and 'he was deceiving investors for a long time in a venture company he was previously involved with.' In addition, it alleges that the CAIAC project failed because Mr. Mostak devoted his money and resources to another project, namely Stable Diffusion, and seeks to grant damages claims resulting from Mr. Mostak's wrongdoing. filed a complaint in federal court for the Northern District of California.
Avi Weitzman, a lawyer representing Hodes, said: 'Mr Mostak's purchase of stock for just $100 is greedy at its best and conscience-shaking. These deals should be reversed. Yes, Hodes' equity ownership in Stability AI should be restored.' Mr. Mostak has pointed out the suspicion that he tried to destroy the evidence by deleting the message history, and has indicated a policy to proceed with the trial in the future.
A spokesperson for Stability AI said in a statement, ``We will actively defend our position.''
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