Stability AI Co-Founder Sued CEO for 10 Percent of the Company

A doctor claiming to be a co-founder of Stability AI, one of the hottest startups in the artificial intelligence space, sued the company last week, claiming that he was cut out of the company and demanding that it fulfill its promise of 10 percent ownership equity. 

The lawsuit was filed on May 18 in the U.S. District Court for the Eastern District of Virginia, Norfolk division, and was dismissed by the plaintiff on the same day.

Tayab Waseem, a computational biologist specializing in AI uses for medicine and policy, filed a complaint against Stability AI and its co-founder and CEO Mohammad Emad Mostaque on May 18. Waseem claimed that from July 2020 through July 2021, he served as Chief Scientific Officer of Stability AI, and was presented to investors as a member of the foundering team. He claimed that Stability AI promised him 10 percent common stock in the company, to be vested immediately, in lieu of a paycheck. 

As of March, Stability AI is reportedly seeking to raise funds at a valuation of about $4 billion, and in 2022, it raised a seed round of $1 billion. Stability AI created Stable Diffusion, a text-to-image deep learning model that’s been accused of stealing artist’s work to create AI-generated images. Getty Images sued Mostaque and Stability AI earlier this year, claiming “brazen infringement of Getty Images’ intellectual property on a staggering scale.” That lawsuit is ongoing. 

Unlike its primary competitor in the image generating AI space, Open AI’s DALL E, Stable Diffusion is open source, meaning users are free to tweak how it works. This is why Stable Diffusion is a popular tool for producing AI-generated porn, something that DALL E doesn’t allow. 

Mostaque recently wrote on Twitter that artificial general intelligence poses an “existential threat to humanity.” 

Waseem’s complaint claims that in March 2021, on a Zoom call with co-founders Cyrus Hobes and Mostaque: 

Waseem claimed that he worked there for a year—helping secure funding, meeting with investors, drafting “numerous” proposals for grant application, and supervising contractors—before taking leave to finish medical school in July 2021, something he said he’d put off doing in order to help Stability AI grow. During that time, he claimed, he helped secure crucial funding that helped advance the company to what it is today—a leader in the generative AI industry, worth billions—including his work with Mostaque’s Collective & Augmented Intelligence Against COVID-19 (CAIAC), and the collective’s Trinity Challenge, which was focused on “improving the use of data and analytics in response to health emergencies,” according to the complaint. 

“Through the CAIAC and the Trinity Challenge, which Dr. Waseem was instrumental in developing, Stability AI received funding. Stability AI used this funding to further develop its generative AI models as well as provide resources to other groups that were developing AI models,” the complaint states.

Mostaque and the other leadership at the company knew he planned to take a leave of absence to finish med school in 2021, he claimed in the lawsuit, and that they agreed that he’d return when he was finished. But when he came back to Stability AI, Waseem claimed, he’d been cut out. 

“When Dr. Waseem attempted to return to Stability AI following competition of his clinical year, Defendants wrongfully cut-out Dr. Waseem from the company, denied him his 10% ownership interest, and failed to compensate him for any of the work he performed for Stability AI,” the complaint stated. Waseem claimed that Mostaque ignored his emails, forcing him to pursue legal action.

Much of the complaint is devoted to proving that Waseem was considered a co-founder and held a leadership position at the company in its early years. In 2020, the official Stability AI Twitter account promoted an event that Waseem spoke at, and called him “Chief Scientific Officer of,” inserting a link to the Stability AI website after his title. Waseem is listed as “Chief Scientific Officer and co-founder” of Stability AI in the event’s promotional image. This is one of several examples the plaintiffs list as examples that attempt to prove Stability considered Waseem a co-founder, including a pitch deck for investors that listed Waseem as one of the company’s three leaders, “right alongside Mostaque and [Cyrus] Hodes.” 

The complaint was filed on May 18 in a Virginia district court where Waseem is based; Stability AI is incorporated in Delaware and the United Kingdom. The complaint was dismissed voluntarily by Waseem’s counsel on the same day that it was filed. Counsel for Waseem, as well as Mostaque and Stability AI, did not immediately respond to Motherboard’s request for comment.