A former science lead at the company behind buzzy AI image generator Stable Diffusion has sued the business again – this time for up to $300 million, court filings show.
Tayab Waseem claims that he was a cofounder in Stability AI and that the company has reneged on its promise of a 10% stake in the London-based AI startup.
Stability AI rose to prominence in 2022 when users flooded its Stable Diffusion program, generating images of everything from hyperrealistic portraits to fantasy landscapes. The startup has raised $197 million to date, with high-profile investors like Coatue, Lightspeed, and Intel among its backers.
A Stability AI spokesperson said the lawsuit was “opportunistic and baseless” and that it had been previously been filed and withdrawn.
“Waseem was a medical student and intern who departed to resume his studies well before Stability AI shifted its business to generative AI,” the spokesperson told BI. “Any claim that Waseem was unfairly treated by Stability AI is without merit and we will aggressively defend our position in court.”
Stability AI has struggled since its peak, which coincided with the AI frenzy generated by the launch of ChatGPT-3.
This is not the only legal battle Stability AI has become embroiled in. It’s fighting one of the most high-profile AI copyright suits against Getty Images, the outcome of which could have a considerable impact on how AI works in the future.
CEO Emad Mostaque is also battling a similar battle with fellow cofounder Cyrus Hodes, who sued the company in July for “duping him out of a $100 million stake.”
Mostaque has also shopped Stability AI around to potential buyers, Bloomberg reported in November.
Stable Diffusion 2
Waseem originally filed a case against Stability AI last May but revoked it on the same day after the company reached out to him to agree to work towards a resolution, he told BI.
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On Tuesday, he refiled the suit with additional details in the U.S District Court for the Eastern Court of Virginia. He claimed that he was not fairly allocated his share of stock in the company — which amounts to between $100 million and $300 million.
The claim values Stability AI at between $1 billion and $3 billion. Stability AI raised an undisclosed amount from Intel in October 2023. Bloomberg previously reported that the startup secured just under $50 million in the form of a convertible note. Its valuation was publicly disclosed to be $1 billion in October 2022, but the recent filings suggest that it has been raised up to $3 billion.
Waseem joined Stability AI when the cofounders, Mostaque and Hodes, were launching a project called CAIAC, which used AI to combat COVID-19, Waseem told BI. Due to his background in immunology, Waseem was invited to join the project — and ultimately become the chief scientific officer at the company.
According to the filing, Stability AI had not paid him a formal salary due to cash flow problems, instead promising him 10% in equity interest.
The lawsuit claims that Waseem had spearheaded efforts for successful grant applications in the UK, which gave Stability AI the funds to hire employees. Waseem also claimed that he spent $11,000 of his own money on the startup, despite not being paid a formal salary, the lawsuit said.
January 17, 2024: This story has been updated to include a statement from Stability AI.
Are you an employee or former employee who worked at Stability AI? Contact this reporter at rkanetkar@insider.com.
