OpenAI Faces SEC Investigation After CEO Sam Altman Allegedly Misled Investors

By Thea Felicity

Feb 29, 2024 10:20 AM EST

(Photo : Photo by OLIVIER DOULIERY/AFP via Getty Images)
(ILLUSTRATION) This illustration photo produced in Arlington, Virginia on November 20, 2023, shows a smart phone screen displaying the logo of OpenAI juxtaposed with a screen showing a photo of former OpenAI CEO Sam Altman attending the Asia-Pacific Economic Cooperation (APEC) Leaders' Week in San Francisco, California, on November 16, 2023. Hundreds of staff at OpenAI threatened to quit the leading artificial intelligence company on November 20, 2023 and join Microsoft. They would follow OpenAI co-founder Sam Altman, who said he was starting an AI subsidiary at Microsoft following his shock sacking on November 17, 2023 from the company whose ChatGPT chatbot has led the rapid rise of artificial intelligence technology. In a letter, some of OpenAI's most senior staff members threatened to leave the company if the board did not get replaced. Reports said as many as 500 of OpenAI's 770 employees signed the letter. The startup's board sacked Altman on Friday, with US media citing concerns that he was underestimating the dangers of its tech and leading the company away from its stated mission -- claims his successor has denied.

US regulators are looking into internal communications from OpenAI's CEO, Sam Altman, amid allegations of investor deception, as per The Guardian.

OpenAI's ChatGPT product, introduced in November 2022, has garnered significant popularity globally, propelling the company's recent valuation to $80 billion (£63 billion).

However, alongside its success, the artificial intelligence firm finds itself under the regulatory microscope, with multiple investigations initiated by regulatory bodies.

In January, the US Federal Trade Commission disclosed its investigation into Open AI and other tech firms, such as Amazon and Alphabet, to scrutinize AI investments and assess their impact on competition within the sector.

Simultaneously, the UK's Competition and Markets Authority announced its intent in December to examine OpenAI's partnership with Microsoft, its primary investor.

Now, another investigation will be opened by the SEC.

Prior to this, however, The Wall Street Journal reported that the Securities and Exchange Commission (SEC) had already issued subpoenas for emails and records from directors and officials at the ChatGPT creator following an inquiry launched in December.

The decision to initiate the investigation stemmed from Altman's departure as the head of the San Francisco-based company in November, just after it was prompted by allegations of inconsistency in communication, with the board expressing doubts about his leadership abilities.

Altman was reinstated less than a week later, accompanied by introducing a new board, after facing resistance from the company's 750-strong workforce, backed by Microsoft.

According to the same WSJ report, insiders familiar with the SEC probe suggested that it was a foreseeable reaction to the concerns raised by the board during Altman's initial dismissal.

Notably, the SEC inquiry hasn't identified any specific statements or communications by Altman that might have been misleading.

OpenAI has yet to respond to investigations and their potential implications.