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SEC Investigates Whether Sam Altman’s Politicking Misled OpenAI Investors

OpenAI CEO Sam Altman is reportedly under scrutiny as part of an investigation by the Securities and Exchange Commission into whether his company misled investors as part of its November boardroom scuffle.

The tête-à-tête saw Altman accused of not being “consistently candid in his communications with the board” and misrepresenting the views of other board members in private discussions.

OpenAI executives, including Altman, were issued a subpoena by the SEC in December, and the agency is looking for internal records and communications from current and former OpenAI directors and officials.

“With a formal order of investigation, the division’s staff may compel witnesses by subpoena to testify and produce books, records and other relevant documents,” the SEC said on its website. “Following an investigation, SEC staff present their findings to the commission for its review. The commission can authorize the staff to file a case in federal court or bring an administrative action.”

The probe is related to the SEC’s directive to enforce laws that forbid people from misleading investors, regardless of whether fundraisers are seeking capital in public or private markets. By most reports, the current investigation into Altman’s communications stems from events surrounding the OpenAI CEO’s ouster late last year, which was rumored to have sprung from a long-simmering disagreement internally over the speedy deployment and commercialization of the company’s public-facing ChatGPT and other generative AI products.

OpenAI did not respond to PYMNTS’ request for comment. An SEC spokesperson told PYMNTS the commission does not comment on the “existence or nonexistence” of investigations.

The SEC noted that in many cases, the agency closes investigations without making formal accusations of wrongdoing, and the SEC and the party under investigation also frequently “settle matters without trial.”

Read also: What Does it Mean to be Good for Humanity? Don’t Ask OpenAI Right Now

OpenAI’s Year in Review Now Under Federal Scrutiny

When OpenAI was first formed in 2015, the company’s structure was purpose-built around the specific goal of responsibly achieving an artificial general intelligence (AGI) that would benefit humanity.

That mission came to a head in November, when Altman was fired, and then re-hired, in the span of little more than a single weekend.

To regain his job as CEO, Altman agreed to an internal investigation — among other conditions — and the abrupt nature of his firing, along with the rationale for the actions given by the OpenAI board that Altman hadn’t been “consistently candid in his communications,” set up broader expectations among many observers that some kind of smoking gun at the center would be forthcoming.

At the time of Altman’s firing, the board of directors consisted of Altman himself; OpenAI President Greg Brockman, who was also fired along with Altman; and the four people who ousted them: OpenAI Chief Scientist Ilya Sutskever, Quora CEO Adam D’Angelo, AI academic Helen Toner, and entrepreneur Tasha McCauley.

The directors’ move was the culmination of months spent mulling issues around Altman’s “strategic maneuvering and a perceived lack of transparency,” Bloomberg reported. It was a general pattern of behavior rather than a single egregious action that led to his firing.

In the aftermath of Altman’s firing, a majority of OpenAI’s senior leadership team and employee base asked for Altman to come back as CEO and for the board to resign.

“We are encouraged by the changes to the OpenAI board,” Microsoft Chairman and CEO Satya Nadella posted on X, formerly known as Twitter, after Altman’s reinstatement. “We believe this is a first essential step on a path to more stable, well-informed and effective governance.”

These are the events that the SEC’s civil investigation is alleged to be centered around.

The Innovation-Regulation Tug of War Playing out in Real Time

News of the SEC’s investigation into OpenAI marks the latest in a series of legal and regulatory challenges confronting the AI pioneer, which was valued this month at $80 billion and surpassed $2 billion in annualized revenue in December.

But Altman is also clashing with regulators as he looks to raise up to $7 trillion for an initiative aimed at enhancing the global manufacturing of AI chips, as the venture has the potential to raise national security and antitrust concerns within the United States.

OpenAI as a business is also locked in a courtroom battle with The New York Times, which sued the company and Microsoft in December for copyright infringement, claiming they used the newspaper’s content without consent to develop their AI products.

Earlier this week, OpenAI claimed in a court filing that the Times used deceptive prompts to cause the company’s technology to reproduce the publisher’s copyrighted material, and thus violated its terms of service.

In an email to PYMNTS, an attorney for The New York Times called the company’s claims “bizarre.”

Elsewhere, the company’s relationship with Microsoft has gotten the attention of regulators in the United Kingdom and Europe. The U.K.’s Competition and Markets Authority said in December that it wants to determine if “recent developments” have created a merger situation and if a merger could affect competition in Great Britain.

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