Devin Kim, who now heads an AI safety-focused think tank, claims he was fired in September 2025 after repeatedly warning that xAI’s approach to safety testing could lead to harmful outcomes, including discrimination and the potential misuse of artificial intelligence systems.

According to the lawsuit, Kim argued that the company failed to prioritize adequate safeguards in the development of its AI products. He also alleged that internal resistance to his proposals created a hostile environment, culminating in his termination shortly before he was scheduled to present on AI safety to leadership.

The complaint accuses xAI and its parent-linked entity, SpaceX, of wrongful termination and retaliation under California law, and seeks unspecified damages.

xAI and SpaceX have not responded to requests for comment.

The case comes amid broader scrutiny of safety practices across Musk-led companies and arrives as SpaceX moves toward a planned initial public offering.

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The issue arose earlier this year after users exploited the AI tool to create sexualised images of individuals without consent, prompting backlash from regulators and lawmakers.

Apple reportedly contacted the developers behind Grok and its parent platform X, requiring them to improve content moderation. Initial updates submitted for review were rejected for failing to meet App Store guidelines.

Subsequent revisions eventually addressed the concerns, allowing the app to remain available. Apple indicated that failure to comply could have resulted in its removal from the platform.

The controversy also drew scrutiny from U.S. lawmakers, who urged both Apple and Google to take action against apps facilitating harmful content.

The incident underscores increasing regulatory pressure on AI platforms to implement stricter safeguards, particularly as generative AI tools become more widely accessible and capable of misuse.

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In a memo posted to SpaceX’s website, Musk explained that terrestrial data centers require immense power and cooling, and meeting global AI energy needs on Earth would impose hardship on communities and the environment. The merger will consolidate xAI’s AI capabilities, including its Grok chatbot and the X social media platform, with SpaceX’s Starlink satellite network.

The merger brings together two companies facing different challenges: xAI reportedly burns $1 billion per month, while SpaceX generates about 80% of its revenue from Starlink launches. Musk indicated that the plan will involve a constant deployment of satellites, which could create a continuous revenue stream.

While space-based data centers are the stated goal, the companies’ immediate priorities differ. SpaceX is focused on Starship rockets for Moon and Mars missions, while xAI competes in the global AI market against firms like OpenAI and Google. Recent reports note regulatory and ethical scrutiny over Grok’s previous misuse in generating sexualised content.

SpaceX has hinted that it may pursue an IPO later this year, though the impact of the merger on those plans remains unclear.

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According to reports from Bloomberg and Reuters, discussions remain at an early stage, but could eventually result in one or more companies folding into SpaceX. Bloomberg reported that one scenario under consideration would merge SpaceX and Tesla, while another would combine SpaceX with xAI, the artificial intelligence firm that owns Musk’s social media platform X.

Reuters reported that a SpaceX-xAI merger could take place ahead of SpaceX’s planned IPO, potentially bringing together Grok, the X platform, Starlink satellites, and SpaceX’s launch operations under a single corporate structure.

Neither SpaceX nor xAI has publicly commented on the talks. However, recent regulatory filings show that two new corporate entities — K2 Merger Sub Inc. and K2 Merger Sub 2 LLC — were registered in Nevada on January 21, suggesting preparations for multiple merger outcomes.

Analysts say each scenario carries strategic advantages. A SpaceX-xAI merger could support Musk’s ambition to place data centers in space, while a SpaceX-Tesla combination could align Tesla’s energy storage business with space-based computing infrastructure.

The potential consolidation also aligns with Musk’s recent efforts to share resources across his companies. In 2025, SpaceX invested $2 billion in xAI, according to The Wall Street Journal, while Tesla disclosed earlier this week that it had also invested $2 billion in the AI startup.

xAI acquired X last year in a deal valuing xAI at $80 billion and X at $33 billion. SpaceX, founded in 2002, was recently valued at approximately $800 billion during a secondary share sale, making it the most valuable private company in the United States.

The Financial Times previously reported that Musk is targeting a June IPO for SpaceX, though Musk’s timelines have historically been subject to change.

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Global backlash intensified on Thursday over sexualised deepfake images generated by Grok, the artificial intelligence chatbot developed by Elon Musk’s xAI, despite moves by social media platform X to restrict the tool’s use.

The Philippines became the third country to block Grok, following similar actions by Malaysia and Indonesia, as concerns grew over the chatbot’s ability to generate lewd images of women and children. Authorities in Britain and France also signalled they would sustain pressure on X and its parent company to ensure full compliance with local laws.

On Wednesday, X announced it would “geoblock the ability” of Grok and X users to create images of people in “bikinis, underwear, and similar attire” in jurisdictions where such content is illegal. However, the company did not immediately clarify the specific locations affected by the restriction.

The move followed the launch of investigations by several governments, including the United States, where California’s attorney general opened a probe into xAI over the circulation of sexually explicit material generated by the chatbot.

Earlier attempts by Grok to limit image generation to paying subscribers sparked further criticism, with opponents accusing Musk’s company of seeking to monetise the controversy rather than address the underlying problem. Bowing to mounting global pressure, X later announced that all users — including subscribers — would be barred from using Grok to edit images of people in revealing clothing.

Despite the announcement, Philippine authorities ordered the “immediate blocking” of Grok late on Thursday. The country’s cybercrime chief, Renato Paraiso, said regulators would closely monitor whether X fully implements its promised safeguards. Telecommunications Secretary Henry Rhoel Aguda said the spread of toxic online content, particularly through AI, required urgent action.

In Malaysia, Communications Minister Fahmi Fadzil said regulators found X’s restrictions were “not done in totality,” adding that the temporary ban on Grok would only be lifted if the platform fully prevented the generation of such images.

In the United Kingdom, Prime Minister Keir Starmer welcomed X’s stated commitment to comply with British law but warned that enforcement must be immediate. He added that the government was prepared to strengthen existing legislation if necessary.

The controversy centres on Grok’s so-called “Spicy Mode,” which allowed users to create sexualised deepfakes through simple prompts such as requesting images of individuals in bikinis or removing their clothing. The European Commission said it would closely assess X’s actions to ensure they adequately protect citizens, while France’s digital minister, Anne Le Henanff, warned that no platform was above the law.

In the United States, California Governor Gavin Newsom described xAI’s decision to allow such content as “vile,” prompting Attorney General Rob Bonta to vow accountability. Bonta said the state has “zero tolerance” for the creation and spread of non-consensual intimate images or child sexual abuse material.

Adding to the pressure, a coalition of 28 civil society groups submitted open letters to Apple and Google, urging them to remove Grok and X from their app stores amid the surge in sexualised AI-generated images.

AFP

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The move follows growing global scrutiny of Grok’s image generation features, which regulators in several countries say have been used to create sexualised deepfake images of women and underage girls. Governments including those of India, Germany, France and Malaysia have launched inquiries or taken regulatory action against the tool.

Indonesia’s Communications and Digital Minister, Meutya Hafid, said the government views non-consensual deepfakes as a serious violation of human rights, personal dignity and digital security.

While other countries have opened investigations into Grok, Indonesia is the first to impose an outright block on the chatbot, according to media reports. The British Broadcasting Corporation (BBC) has reported that the United Kingdom is also considering restrictions on Musk’s social media platform X over alleged failures to comply with online safety laws.

Musk has previously said that X would take action against users who prompt Grok to generate illegal content, including banning offending accounts. However, India’s government said it was not satisfied with xAI’s response and is considering further action.

On January 8, Musk announced that Grok’s image generation and editing features would be restricted to paid subscribers as the company works to address safeguards that allowed the creation of sexualised images.

X has offered to provide Indian authorities with a detailed demonstration of how Grok operates and to explain its content moderation systems, according to Reuters.

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The move comes after reports showed that Grok was being used to generate semi-nude and sexualised images of women and children, often without consent, triggering criticism from European lawmakers and regulators. German media minister Wolfram Weimer described the trend as the “industrialisation of sexual harassment,” while the European Commission labelled the content illegal.

On Friday, Grok notified users on X that image generation and editing tools were now available only to paying subscribers. However, the standalone Grok app, which operates independently of X, continues to allow free image generation.

When a Reuters reporter attempted to use Grok on X to alter an image, the chatbot declined, stating that the feature was limited to paid users. In response to a request for comment, xAI issued an automated reply saying “Legacy Media Lies,” while X did not immediately respond.

The European Commission said the images circulating on X were unlawful and appalling, while Britain’s data regulator said it had contacted the platform to explain how it was complying with data protection laws. Musk has previously warned that users generating illegal content with Grok would face the same penalties as those uploading such material directly.

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Technology minister Liz Kendall said the content was “absolutely appalling” and called on the platform to act swiftly. Creating or sharing AI-generated sexual imagery, including content involving minors, is illegal under UK law.

X’s Safety account said the platform removes illegal content and permanently suspends offending accounts. The company has not formally responded to the latest government comments.

UK media regulator Ofcom said it has made urgent contact with X and its AI arm, xAI, to assess compliance with legal obligations. Similar concerns have been raised by regulators in France, India and the European Union.

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In a statement on Tuesday, xAI said it initially sought $15 billion but exceeded its target due to strong investor demand. People familiar with the matter said the funding round could value the company at more than $230 billion, placing xAI among the most valuable privately held technology firms globally just two years after its founding.

The company said the capital would be used to expand its computing infrastructure and accelerate research as it builds out data centres to support the training of increasingly powerful AI models.

The funding comes amid a broader surge in AI investment. Nearly two-thirds of global venture capital funding in the first nine months of 2025 went to AI-focused companies, according to data from PitchBook. Much of that capital has flowed into so-called foundational model developers, including OpenAI, Anthropic and xAI, which together now command a combined private valuation approaching $1 trillion.

Investors in xAI’s latest round include Fidelity, the Qatar Investment Authority, Valor Equity Partners and Nvidia, the leading supplier of AI chips. PitchBook estimates that xAI has now raised more than $42 billion in total funding.

Musk, who co-founded OpenAI before parting ways with the company over strategic disagreements, launched xAI in 2023 as a direct challenger to ChatGPT and Google’s Gemini. To narrow the gap, xAI has invested heavily in computing infrastructure, including large data centre projects in Memphis, Tennessee.

Its flagship chatbot, Grok, has drawn controversy for producing offensive outputs, including praise for Adolf Hitler, repetition of Musk’s personal views and the generation of non-consensual explicit images. Despite the criticism, Musk has positioned Grok as a more provocative alternative to rival chatbots.

xAI has said it plans to release Grok 5 early this year. In a post on his social media platform X, Musk claimed the model had a “10% chance” of reaching artificial general intelligence, a loosely defined benchmark for human-level task performance.

Musk is also embroiled in legal disputes with OpenAI, alleging the company misappropriated trade secrets and recruited xAI staff. He has separately sued OpenAI and Apple, accusing them of anti-competitive practices designed to block Grok’s growth. Both cases are ongoing.

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In a statement posted on X on Friday, Grok said that while safeguards were in place, “isolated cases” had occurred where users prompted and received such images. The company said it was urgently fixing the issue, noting that child sexual abuse material (CSAM) is illegal and strictly prohibited.

Screenshots shared by users showed Grok’s public media tab filled with altered images after users uploaded photos and prompted the chatbot to modify them.

Grok did not provide further technical details. When contacted for comment, xAI responded to Reuters with the message “Legacy Media Lies.”

In a separate response to a user, Grok said most cases could be prevented through advanced filters and monitoring but acknowledged that “no system is 100% foolproof.”

The issue has triggered regulatory scrutiny in multiple countries. French ministers said they had reported Grok-generated sexually explicit content to prosecutors and to media regulator Arcom, describing it as “manifestly illegal” and potentially in breach of the European Union’s Digital Services Act.

India’s IT ministry also wrote to X’s local unit, saying the platform failed to prevent the misuse of Grok to generate obscene and sexually explicit content involving women. The ministry ordered X to submit an action-taken report within three days.

The US Federal Communications Commission did not respond to requests for comment, while the Federal Trade Commission declined to comment.

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