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"Cheat" 15% of the shares for $100! Stability AI co-founder sues company
**Source: **Financial Association
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Stability AI co-founder Cyrus Hode sued the artificial intelligence startup and its CEO Emad Mostaque on Thursday, claiming he was duped into selling his investment in the $1 billion startup for just $100. 15% stake.
**Hodes co-founded Stability AI in 2020 with current CEO Mostaque. He claimed in the lawsuit filed Thursday that Mostaque bought his entire 15 percent stake after convincing him that "this company he helped build was essentially worthless." **
But in August 2022, three months after the aforementioned equity deal, Mostaque led a $101 million funding round, giving the UK-based AI startup a post-money valuation valued at $1 billion
Stability AI is currently trying to raise new funding at a $4 billion valuation, according to the lawsuit, and OpenAI's launch of ChatGPT late last year sparked interest in generative artificial intelligence.
**If Mostaque hits its target valuation, Hodes' stake, if he still owns it, could be worth about $500 million. **
“Mostaque’s purchase of these shares from the co-founders and minority shareholders for as little as $100 is the epitome of corporate greed at its worst, and it’s outrageously unconscionable,” Hode said in the complaint.
Hodes wants his original 15 per cent stake reinstated, plus punitive damages for the accused's alleged fraud and alleged breach of fiduciary duty.
Stability AI, headquartered in London, UK, with operations in San Francisco, US, currently lists itself as "the world's leading open source generative artificial intelligence company" that can generate 3D models based on text.
Regarding the lawsuit, Stability AI said in an email that "the lawsuit has no merit and we will vigorously defend our position."
Hodes has been working on artificial intelligence projects for the better part of a decade, a role that includes advising the UAE and the OECD on the technology's impact on the country. He is also Director of the Artificial Intelligence Program at Harvard University's Kennedy School of Government.
He said he has worked "countless hours" at Stability AI since early 2020 to help governments respond more quickly to the COVID-19 pandemic.